Bank loan appraisal is an important step in deciding whether to lend to corporate customers or not. So what are the steps in loan appraisal for corporate customers? Please read the article compiled by SeABank below!
What is loan appraisal?
Loan appraisal is the process by which a bank or valuation organization conducts an inspection as well as reviews and analyzes mortgaged assets such as red books, pink books, savings books, etc. to determine the loan limit for corporate customers.
Is loan appraisal really necessary?
Loan appraisal is a necessary activity to know whether the borrower has the ability to repay the debt or not, helping the bank limit risks in the lending process.
Corporate loan appraisal process
Depending on the loan plan, during the appraisal process, the analyst will use different information such as: Reviewing customer records, meeting to discuss directly, checking the actual business situation,... combined with information from customers, management agencies, competitors,... to accurately evaluate the customer. In complicated cases, the analyst will make a report to the Board of Directors.
Corporate loan appraisal process
General assessment of borrowers
The bank branch will conduct a business legality check. The legal file will ask the business customer to provide the following documents:
- Minutes, decision to establish the enterprise.
- Business registration certificate, seal certificate, tax code.
- Charter of organization and operation of the enterprise.
- Certificate of charter capital and legal capital of the organization.
- Certificate of right to use assets such as land, houses,... of the enterprise.
- Decision to appoint Chairman of the Board of Directors, General Director and Chief Accountant.
After receiving the above documents, the bank branch will conduct an appraisal process to check whether the documents are valid, still have legal value and check the honesty of the business in the business registration certificate.
Customer financial appraisal
Balance sheet analysis: This is the source of information for banks to know all current assets of the enterprise, physical form, structure of assets, capital sources as well as capital structure. Therefore, the balance sheet is an important document for banks to evaluate the overall situation, business performance, economic and financial development prospects of the enterprise.
The balance sheet is an important factor that helps banks judge a business's ability to repay its debts.
Analyze the business performance report: This is a report that shows the financial situation as well as the business results of the enterprise by quarter and by year. The business performance report shows information related to the financial situation, results of capital use, technology, labor as well as the level of management of the customer's business process.
Cash flow statement analysis: This is a type of report that reflects the process of forming and using money during the reporting period. This report will help determine the cash flow brought by business activities and predict future cash flows. From there, the bank can evaluate the ability to pay debts and interest.
Financial statement analysis: To know more about the production and business situation that is not yet in the financial reporting system. In addition, this also helps clarify expenses that are not mentioned in the financial report.
Appraisal of customer's plan or project
Commercial banks as lenders will be very interested in the financial appraisal and feasibility of the project/plan because it is of primary importance in the appraisal content. Through the appraisal, the bank will have a comprehensive view of the project, assess the need for total investment capital, capital structure and capital usage as well as the financial efficiency that the capital brings and the project's debt repayment capacity.
With the goal of safe profitability, banks only decide to lend to projects that are capable of generating profits to repay loans (including principal and interest).
Project feasibility is important in lending decisions.
Loan security appraisal
In essence, loan security is one of many measures to ensure the performance of obligations under a loan contract, this is not a mandatory condition. Therefore, whether or not this measure is present does not affect the implementation of rights and obligations of the parties involved. The party with the obligation to repay the debt must still strictly perform its obligations and be subject to measures related to assets if there is a violation.
Factors determining loan appraisal results
For customers
- Customers need to demonstrate and prove to the appraisal department that they are fully capable of repaying the debt by showing the bank a stable source of income.
- Make sure your credit history has no bad debt.
- Mortgaged assets must comply with bank regulations.
Credit history has a big impact on the appraisal process.
For property
- Mortgaged assets such as houses, land, cars, buildings, etc. must be guaranteed to be legal.
- Collateral must be owned or controlled by the borrower.
- The property is not prohibited from being bought, sold or transferred.
- The property is not in dispute at the time of signing the loan contract.
Conclusion
Appraising loans for business customers is an indispensable activity of banks when lending. Therefore, you need to prepare all the necessary documents so that the business loan process takes place quickly. If you have any questions about the loan appraisal process at SeABank, please go to the nearest transaction office to get your questions answered.
