1、天天文档在线 联系 qq：744421982 HANVIT BANK SMALL BUSINESS COMMERCIAL LOAN APPROVAL PROCESS (Draft) 11/10/99 Prepared by KPMG, LLP Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 2 TABLE OF CONTENTS CREDIT REVIEW AND LOAN APPROVAL FOR SMALL BUSINESS LOANS .3 TABLE 1 - APPLICABILITY OF RETAIL SC
2、ORECARD IN BUSINESS LOAN DECISION BY TOTAL LOAN AMOUNTS.3 TABLE 2 - CREDIT REVIEW PROCESS.4 TABLE 3 - APPLICABILITY OF RETAIL SCORECARD IN BUSINESS LOAN DECISION BY BORROWING ENTITY4 LOAN DECISION PROCESS.5 STEPS IN CREDIT REVIEW FOR SMALL BUSINESS LOANS.6 LIMITS, PRICING, RATING.9 NOTE CONCERNING L
3、OAN APPLICATIONS NOT PROCESSED IN CRMS.10 APPENDIX A- USE OF RETAIL SCORECARD VS FINANCIAL ANALYSIS IN COMMERCIAL LENDING.12 APPENDIX B- WHAT THE BANK SHOULD REVIEW.14 Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 3 CREDIT REVIEW AND LOAN APPROVAL FOR SMALL BUSINESS LOANS For purpose
4、s of this document, Small Business Loans will be defined as those whose total amount is within the Branch Managers or Relationship Managers lending limit as defined in the Hanvit Bank credit and lending policy manuals. These loans may range from a few thousand Won to as much as 1.5 billion Won (appr
5、ox. USD1.25 million) for a Class A Commercial Branch Manager. Because of this wide range of loan size, and the corresponding financial size of the businesses, it is difficult to outline a single set of process steps for all such loans. For smaller loans, a simplified procedure will be outlined. For
6、larger loans which begin to approach the W1.5 billion limit, the full CRMS credit analysis should be completed. It is not valid to make an excuse that the borrower does not have accurate financial information which could be used to justify larger loans. While a very small loan could be made based on
7、 personal financial information of the business owner, larger loans require financial analysis and the borrower should be required to fill out Hanvit Bank financial statement forms, if no formal financial information is available. 1 Table 1 - Applicability of Retail Scorecard in Business Loan Decisi
8、on by Total Loan Amounts: Applicability of Retail Scorecard Total LoansBorrowerGuarantor Less than 50 MM Won Adequate if loan is to individual Proprietor - Not applicable for loans to partnerships or corporations Can be used to assess Personal Guarantee W 50MM to W 150MM Adequate for loans to indivi
9、duals, but separate business financial data should be available Not applicable for loans to partnerships or corporations Can be used to assess Personal Guarantee W 150MM to W 250MM Can provide information on individuals, but separate business financial data should be available Not applicable for loa
10、ns to partnerships or corporations Can be used to assess Personal Guarantee Over W 250MM Not applicable. Business financial statements from the borrowing entity should be obtained. Can be used to assess Personal Guarantee 1 NOTE: The financial statements should contain a statement to the fact that t
11、he financial information is being provided to the bank for the purpose of obtaining credit, that the information is true and correct to the best knowledge of the persons whose financial information is represented on the forms and must require signatures of all persons whose financial information is
12、represented attesting to the truth of the information. Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 4 Table 2 - Credit Review Process New Loan Application Total LoansFinancial StatementsRun Scorecard Risk RatingCredit Memo Less than 50 MM Won Not requiredYesLowest Pass Grade None W
13、50MM to W 150MM Recommended. Review based on results of scorecard YesLowest Pass Grade Summary W 150MM to W 250MM2 Required. Informal financial statement review or spreadsheet analysis YesLowest Pass Grade Summary W 250MM W 500MM Required. 3 Informal financial statement review or use of CRMS Modules
14、 Yes, for guarantee Lowest Pass Grade Detailed W 500MM W 1.0 bn Required. Use CRMS ModulesYes, for guarantee BRR from CRMS Modules CRMS Report W 1.0 bn W 1.5 bn Required. Use CRMS ModulesYes, for guarantee BRR, FRR from CRMS Modules CRMS Report Table 3 - Applicability of Retail Scorecard in Business
15、 Loan Decision by Borrowing Entity:4 Business Borrowing Entity Use of ScorecardUse of Business Financial Statements Basis for Loan Decision Individual (One person entity) Can be primary source of loan decision for small loans (See above). Use if available.Net income of the individual (from personal
16、financial statements). Sole Proprietorship (Small Business with employees) Can be primary source of loan decision (See above). Strongly recommended.Net income of the business, (from personal or business financial statements). PartnershipTo value strength of guarantors.5 Required.Financial strength o
17、f the partnership business. SME Account (Un- Audited) To value strength of guarantors. Required.Financial strength of the business entity. SME Account (Audited) To value strength of guarantors. Required.Financial strength of the business entity. Large Corporate Account Not appropriateRequired.Financ
18、ial strength of the business entity. 2 Small business credit scoring in the U.S. has shown that for loans above USD100,000 (approx. W 120 million) the accuracy of scorecards prediction of business owner behavior diminishes and more reliance is required on financial statements and business plans. “Im
19、pact on Small Business Scoring”, Meridien Research, April 1998. 3 The U.S. Federal Reserve Board cautions against the use of credit scoring techniques for loans or credits that are large or complex. 4 See Appendix A for additional information. 5 See discussion related to importance of obtaining pers
20、onal guarantees. Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 5 LOAN DECISION PROCESS: To facilitate simplification of the loan application analysis process, certain policy-based conditions should be set which will be the first gate through which the loan request will proceed. If th
21、e borrower fails to meet these conditions, the loan request should be rejected with no further review. For example, if a certain condition exists, such as a Red Condition the bank policy will dictate that the loan request will be rejected. The next steps will depend on the size of the loan and size
22、of the borrower. The decision to make the loan is to be based principally on the cash flow of the business. The main question is whether the net cash flow of the business entity or the net income of the individual (after all business and/or household expenses) is sufficient to repay the loan. Cash f
23、low analysis will require financial statements. Thus for all but the smallest loans (see table above), financial statements should be obtained. These statements could be prepared by the borrowers accountant. If the borrower does not have an accountant, the bank should demand income tax returns from
24、the borrower and the principal owners as will be described below. Alternatively, it has been recommended that Hanvit Bank develop financial statement forms (balance sheet, income statement, cash flow statements) which can be given to the borrower to be filled out. NOTE: If the borrower will not prov
25、ide financial information sufficient to show that the borrower personally or the business entity has the ability to repay the loan, the loan should not be made. The review of the financial statements should look mostly at the cash flow as it relates to the loan request. Assets of the business which
26、can be pledged, or guarantees of the principal owners of the corporation are only safeguards in the event of business failure. They should not be the primary criteria for approving the loan since without adequate cash flow, the loan would go into default immediately. Cash flow capability should be d
27、etermined as follows: Determine the monthly cash flow of the business entity from the financial statements or tax returns as appropriate. Determine the monthly loan payment required to repay the loan over the requested term. If the amount of the monthly cash flow in excess of the monthly loan repaym
28、ent is not substantial, the loan should probably not be made under those terms. A smaller loan, or extended repayment term may be required for the borrower to qualify for the loan. Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 6 STEPS IN CREDIT REVIEW FOR SMALL BUSINESS LOANS: The fo
29、llowing sections set out some steps for loan decision making and processing. The goal is to provide an efficient, cost effective decision process while maintaining the highest possible accuracy of the decision to avoid loan losses. Answers to these questions will guide the Relationship Manager (RM)
30、to ask for the proper information to allow the RM to make an informed decision on the loan request. The RM should utilize the Hanvit Bank loan application forms for all information related to the loan. The Borrowers Business: What is the name of the Business? Is the Business, An individual business
31、person (Proprietorship)? Is it a separate legal entity?Y/N What kind of legal entity?Partnership? Corporation? Proprietorship: If the borrower is operating the business as a sole proprietorship, the borrower will own any business assets as well as the borrowers personal assets in the his/her own nam
32、e. If this is the case, the bank should get financial statements from the borrower listing all business and personal assets. The bank should also get the last three (3) years income tax returns which should show the business income and any other personal income (such as from a spouse). If the borrow
33、er and the spouse file separate income tax returns, the bank should get the last 3 income tax returns from each person. This is required to get as accurate a look as possible into the amount of income the borrower actually has. This income should be compared against the business and household expens
34、es of the borrower and spouse to determine the amount of money the borrower has remaining to be used for loan payments. Partnership or Corporation: If the business is a partnership or corporation, it will have separate financial statements from the personal financial statements of the principals of
35、the business who are requesting financing. In this case, at least three years financial statements should be obtained for the business. An analysis of the business financial statements will determine the size and financial strength of the business. For underlimit loans it is likely that the business
36、 is small and that there will be a need to have the loans to the business guaranteed by the principal owners of the business (partners or shareholders). If this is the case, it is required that the bank get the personal income tax returns of all such owners as well as their own personal balance shee
37、t (a listing of assets and liabilities). To whom is the loan being made? Loans should generally be made to the entity which owns the business assets. For small business loans, it is advisable to have all assets of the business pledged to the bank as collateral for the loans. If the borrower requests
38、 that the loan is to be made to the borrower personally for investment in the business, or to another entity special caution is required. In all cases, the Hanvit Bank Small Business Loan Approval Process _ kpmg Draft 7 financial statements of any party to the loan transaction, the borrower, guarant
39、or, entity pledging collateral, etc. must be obtained and reviewed. What is the Loan Request? How much money is being requested for the Loan? For how long will the money be needed? For what purpose will the money be used?6 How will the loan be repaid? From personal earnings of the business person? F
40、rom net profits from the business? Over what time period (months or years) will the loan be repaid? What payments will be made? Principal and Interest?How Much per Payment? Interest Only? CAUTION: It should be specifically documented why principal is not also being paid on a regular basis. Interest
41、only loans can easily lead to complacency on the part of the borrower and lack of financial discipline. This can lead to large losses when the principal amount is later required to be repaid and the borrower has not set aside enough money to repay the principal. Collateral and Guarantees What collat
42、eral is being pledged to secure the loan? Who will guarantee7 the loan? Personal guarantees should be obtained from the owners of the business, partners, or major shareholders of corporations. In all cases where guarantees are taken, the guarantee must be given by the principals and their spouses. F
43、inancial Information Required Generally the bank should obtain the following information: Personal credit information about the guarantorstypically principals and their spouses Select financial data from borrowers (or guarantors) personal financial statements (e.g., net worth, total assets). Informa
44、tion about any major personal assets offered as collateral such as real estate or other principal assets should be verified by a check of public records of ownership. Company income sheet and tax information (three to five years) Company balance sheets (three to five years) Company cash flow statements (three to five years) Additional information related to the loan request 6 NOTE: If the loan is to purchase business assets, all assets should be taken as collateral 7 U.S. studies have shown that 40% of businesses fail within the first 2 years of operations and 8
个人主页
