Managing/Analyzing Loan Requests, Business Feasibility and Borrower’s Credibility
INTRODUCTION
Financing any venture is usually a challenging activity and finding the required amount of funds needed to achieve such venture is not as easy as just saying, “we need money”.
Getting finance is a must for any business venture to succeed because money is required to make projects happen. Therefore, business owners and companies resort to borrowing many times to finance these projects.
To give a loan which is essentially to meet the financial demands of a borrower or supply part of the demands of a borrower is a very risky business which is both rewarding and can be really frustrating at times. Loans are essentially periods of credit giving to an individual, company or any other organization. Van Horne and Wachovicz, Jr. (2001) note that a loan agreement is a legal agreement specifying the terms of the loan and the obligations of the borrower.
Analyzing a loan request with a view of making a decision as to whether to give the loan or not, amount to give, period of repayment, mode of payment and grace period for payment and penalties for default is therefore important in order to make an effective lending decision that would result in a profitable endeavour for the lender.
During the course of this presentation I would emphasize more on what things to look out for when considering a loan request to merit a positive decision and I will also discuss two fundamental aspects of loan request evaluation, which are business feasibility and borrower’s credibility.
THINGS TO LOOK OUT FOR IN A LOAN REQUEST TO MERIT A POSITIVE DECISION
1. Clarity: A major factor to consider when evaluating a loan request is how professionally the loan request has been done. The request should be clear and straight to the point stating what the purpose of the loan is or are for. Hofstrand (2006) remarks with regard making a loan request, “when applying for a loan, be prepared to present all aspects of your request so the lender feels that he/she can make an
Financing any venture is usually a challenging activity and finding the required amount of funds needed to achieve such venture is not as easy as just saying, “we need money”.
Getting finance is a must for any business venture to succeed because money is required to make projects happen. Therefore, business owners and companies resort to borrowing many times to finance these projects.
To give a loan which is essentially to meet the financial demands of a borrower or supply part of the demands of a borrower is a very risky business which is both rewarding and can be really frustrating at times. Loans are essentially periods of credit giving to an individual, company or any other organization. Van Horne and Wachovicz, Jr. (2001) note that a loan agreement is a legal agreement specifying the terms of the loan and the obligations of the borrower.
Analyzing a loan request with a view of making a decision as to whether to give the loan or not, amount to give, period of repayment, mode of payment and grace period for payment and penalties for default is therefore important in order to make an effective lending decision that would result in a profitable endeavour for the lender.
During the course of this presentation I would emphasize more on what things to look out for when considering a loan request to merit a positive decision and I will also discuss two fundamental aspects of loan request evaluation, which are business feasibility and borrower’s credibility.
THINGS TO LOOK OUT FOR IN A LOAN REQUEST TO MERIT A POSITIVE DECISION
1. Clarity: A major factor to consider when evaluating a loan request is how professionally the loan request has been done. The request should be clear and straight to the point stating what the purpose of the loan is or are for. Hofstrand (2006) remarks with regard making a loan request, “when applying for a loan, be prepared to present all aspects of your request so the lender feels that he/she can make an
References: 1. Van Horne James C. and Wachowicz John M. Jr. (2001), Fundamentals of Financial Management, 10th Edition, Prentice-Hall, India. 2. Hofstrand Don (2006), Obtaining a Business Loan, (Online) Available: http://www.extension.iastate.edu/agdm/wholefarm/html/c5-95.html 3. Gaebler Ventures (2007), Getting a Small Business Loan, Do you know how to think like a Banker, (Online) Available: www.Gaebler.com.