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LENDING TO BUSINESSES; THE VIEWS OF A BANKER Presented by Frankline Kweyu

This presentation by Frankline Kweyu, a business banker at Nakuru branch of KCB, discusses the key factors that banks consider when lending to businesses, including character, ability, margin, purpose, amount, repayment, insurance, and other considerations.

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LENDING TO BUSINESSES; THE VIEWS OF A BANKER Presented by Frankline Kweyu

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  1. LENDING TO BUSINESSES; THE VIEWS OF A BANKER Presented by FranklineKweyu Business Banker Nakuru Branch 24.10.2013

  2. KCB BUSINESS Segmentation

  3. 1. CAMPARI • Character • Ability • Margin • Purpose • Amount • Repayment • Insurance

  4. 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.

  5. 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?

  6. 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.

  7. 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,

  8. 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?

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

  10. 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)

  11. 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?

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

  13. “Lenders’ Tool kit” • Application Requirements • Management • Pricing • Remuneration • Borrowings from other Banks • Sales and Profitability • Liquidity

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

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

  16. THANK YOU

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