LENDING TO BUSINESSES; THE VIEWS OF A BANKER Presented by Frankline Kweyu Business Banker Nakuru Branch

KCB BUSINESS Segmentation Corporate Business Medium Enterprises Small Enterprises Micro Enterprises Borrowing above 100M Borrowing 20M-100M Borrowing- 500k -20 M Borrowing – 5k to 0.5M

CAMPARI 1. CAMPARI Character Ability Margin Purpose Amount Repayment Insurance

Character The success of any business depends on the owner and management of the Business. Age and health of the borrower Personal assets of the applicant. The banking and credit history of the applicant? This can be checked with the assistance of CRBs. How committed is the applicant to the business? Level of honesty and integrity.

Ability What has been the business record? Is the business acumen sustainable –how long? Is the applicant in control of the business and adaptive to dynamic changes? What other financial obligation/commitments of the borrower should be factored? What would happen if there was change in rates? How strong is the management structure? Would there be need for key man insurance?

Ability Continued……. For employed persons, ability to repay is assessed from the bank statements and pay slips. For business enterprises, ability will be assessed from the Profit and loss accounts, the bank statements. The accounts should be audited by a reputable audit firm. The appraiser will conduct a cash flow of the bank statements to determine the trend of cash flows and its consistency.

Margin How much money is the bank going to make from the mortgage loan? Is the risk and return ratio right? Borrower’s contribution verses bank financing e.g. 90/10, 70/30,

Purpose → Product Why does the applicant want the loan? Can the reason for borrowing be proved? Is the purpose of the loan in line with our lending policy? Is the reason sensible for the business? Is the purpose within the state law? How do you want the extra finance provided?

Amount How much loan is required? How much is needed for the project at hand Do the forecasts look realistic?

Repayment For how long a period is the money required? Is the repayment profile suggested acceptable? Is there available time for the applicant to repay the loan given the source of repayment? If the business can't pay back the loan, can the borrower guarantee the repayment? Are the cash flow forecasts realistic. (cyclical businesses, tenders)

Insurance (Security) What security will be offered for the borrowing? Is additional security required? How well does the offered security fit with the bank's criteria? Does the security available comfortably cover the amount of the loan?

(I.C.E) – other considerations I- Interest. C –Commission/fees. E –Extras – other requirements/products

“ Lenders’ Tool kit” 1.Application Requirements 2.Management 3.Pricing 4.Remuneration 5.Borrowings from other Banks 6.Sales and Profitability 7.Liquidity

“ Lenders’ Tool kit” 8. Solvency 9. Trading since last audit 10. Historical cash flows 11. Projections 12. Sector / Industry

“ Lenders’ Tool kit” 13. Previous Approval Conditions 14. Proposed Business Strategy 15. SWOT Analysis 16. Recommendations

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