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Appraisal of Term Loan
- Concepts, Process and Guidelines
Summary
The overall performance of Indian economy is quite impressive which is marching ahead to achieve even a double digit figure of GDP in the near future. All sectors of the economy namely, agriculture, industry, service and infrastructure are performing exceedingly well. Enterprises in these sectors are planning to go in for expansion, modernization and diversification for which demand for term loan would be substantially large. Hence, banks perceive lot of potential to provide term loan in which credit risk is relatively high. Similarly, deficiencies are being observed in credit decisions which have led to mega loan scandals. Hence, it is necessary to improve the quality of appraisal of term loan on one hand and to strengthen due diligence in credit, on the other. Towards this end, the present article guides on appraisal of term loan by discussing both conceptual and operational aspects, besides providing a list of items of due diligence in credit in terms of bank guidelines
Appraisal of Term Loan
- Concepts, Process and Guidelines
V.S.Kaveri
Introduction:
Firms engaged in industrial and service related activities require funds for various purposes. To commence business, they are expected to invest in fixed assets comprising land and building, plant and machinery, furniture & fixtures etc. Initially, each firm requires minimum fixed assets. Subsequently, additional plant capacity may be created for expansion or for purchase of new plant and machinery for the purposes of modernization and diversification. Besides, the firms require funds to finance other fixed assets also, which include goodwill, trade mark and other non-current assets. To finance all these fixed assets, each firm raises funds in the form of capital, subsidies and grants from the Government, retained earnings in the case of existing firms, term loan from banks and financial
- Concepts, Process and Guidelines
Summary
The overall performance of Indian economy is quite impressive which is marching ahead to achieve even a double digit figure of GDP in the near future. All sectors of the economy namely, agriculture, industry, service and infrastructure are performing exceedingly well. Enterprises in these sectors are planning to go in for expansion, modernization and diversification for which demand for term loan would be substantially large. Hence, banks perceive lot of potential to provide term loan in which credit risk is relatively high. Similarly, deficiencies are being observed in credit decisions which have led to mega loan scandals. Hence, it is necessary to improve the quality of appraisal of term loan on one hand and to strengthen due diligence in credit, on the other. Towards this end, the present article guides on appraisal of term loan by discussing both conceptual and operational aspects, besides providing a list of items of due diligence in credit in terms of bank guidelines
Appraisal of Term Loan
- Concepts, Process and Guidelines
V.S.Kaveri
Introduction:
Firms engaged in industrial and service related activities require funds for various purposes. To commence business, they are expected to invest in fixed assets comprising land and building, plant and machinery, furniture & fixtures etc. Initially, each firm requires minimum fixed assets. Subsequently, additional plant capacity may be created for expansion or for purchase of new plant and machinery for the purposes of modernization and diversification. Besides, the firms require funds to finance other fixed assets also, which include goodwill, trade mark and other non-current assets. To finance all these fixed assets, each firm raises funds in the form of capital, subsidies and grants from the Government, retained earnings in the case of existing firms, term loan from banks and financial