COMMERCIAL LENDING Basis for our external financing analysis.

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Presentation transcript:

COMMERCIAL LENDING Basis for our external financing analysis

SPECIAL FEATURES OF BANKS SCREENING LOAN APPLICANTS IMPARTIAL CREDIT ALLOCATION EFFECTIVE MONITORING

CHANGING LOAN MARKET NEW COMPETITORS SELLING OF LOAN INTO SECONDARY MARKET SPECIALIZED SERVICES

BASIC TYPES OF LOANS SHORT TERM LOANS (< ONE YEAR) TERM LOANS (>ONE YEAR) REVOLVING LINES OF CREDIT - HYBRID BETWEEN SHORT TERM AND TERM DEBT

SHORT TERM LOANS SOURCES OF REPAYMENT - WORKING CAPITAL ANALYSIS - COMPONENTS OF W.C. FACILITY - LINE OF CREDIT COLLATERAL - INVENT; A/R

TERM LOANS REPAYMENT - LONG TERM CASH FLOW ANALYSIS - CASH FLOW FACILITY - FIXED MATURITY AMORT COLLATERAL - WORK CAP; FIXED A.

REVOLVING LINES OF CREDIT REPAYMENT - L.T. CASH FLOW or CONVERSION TO TERM LOAN ANALYSIS - SIMILAR TO TERM LOAN FACILITY -ADVANCES AGAINST COLLATERAL BORROWING BASE

SHORT TERM LOAN PROBLEMS BANK NOT PAID AT END OF CYCLE PRODUCTS NOT PRODUCED AS PLAN CASH FLOW TO PURPOSES OTHER THAN REPAYMENT

S.T. LENDER ERRORS OVERESTIMATES PEAKS/TROUGHS USE OF FUNDS NOT WELL MONITORED TOO LITTLE MARGIN OF ERROR HIGHLY SPECULATIVE INVENTORY

TERM LOAN PROBLEMS INADEQUATE SALES TO AMORT. DEBT TOO NARROW PROFIT MARGINS CASH ABSORBED AT HIGHER RATE INFLEXIBLE MANAGEMENT ASSET OBSOLESCENCE > LOAN AMORT.

TERM LOAN LENDER ERRORS FAIL TO ASSESS MANAGEMENT FAIL TO UNDERSTAND INDUSTRY INDEFINITE PROJECTION FROM PAST DATA FAIL TO ANTICIPATE ADDED CAPITAL OVERESTIMATE COLLATERAL VALUE

REVOLVING LOAN PROBLEMS FUNDS NOT USED FOR WORK. CAP. VIOLATION OF SOUND CREDIT POLICY SPECULATIVE INVENTORY INSUFFICIENT PROFITS

LENDER ERRORS IN REVOLVING LOANS REACTS TOO LATE TO GET SECURITY EXCESSIVE INVENTORY VALUATION LENDER CARRIES BORROWER TOO LONG FAILED LENDING PROCEDURES

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