...4 Demand for Credit: Companies demand credit for various operating, investing and financing activities. Operating activities – many companies have cyclical operating cash needs. For example, manufacturers of inventory or retailers that purchase merchandise for the end of year holiday season. Investing activities – companies routinely require large amounts of cash for investments including purchases of new equipment and property and for corporate acquisitions. Important for start-ups and growth companies. Financing activities – for issuance of debt for repayment of maturing debt obligations or the repurchase of common stock. Supply of Credit: Trade credit – from supplies is routine and most often non-interest bearing. Bank loans – banks structure financing to meet specific client needs. Bank regulators require that banks hold capital in proportion to their loan portfolio. Revolving credit lines – loans that companies draw on as needed. They are like credit cards because a company can take cash out as needed and make payments as cash is available. Lines of credit – are guarantees that funds will be available when needed. These LOC act as backup or interim financing. Letters of credit – facilitate private international transactions. A letter of credit interposes a bank between the two parties to a transaction. The letter provides a guarantee of payment from the buyer. The benefit is that is substitutes the bank’s credit rating for that...
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...1. Most credit cards require that you pay a minimum monthly payment of two percent of the balance. Based upon a balance of $5,270.00, what would be the minimum monthly payment (assuming no other fees are being applied)? I found that the minimum payment that I would be making is $104.40 per month because it is two percent of $5,270. 2. Considering the minimum payment you just calculated, determine the amount of interest and the amount that was applied to reduce the principal. Hint: You’ll need to find the total interest for the year first. The total interest for the year would increase my balance of $5,270 to $6,823. If I determine the amount of interest that will go into my monthly payments, then my payments will be $136.46 instead of $104.40. 3. Consider one of your credit cards. What is the balance? How is the minimum monthly payment determined? What would be the minimum payment? How much of the minimum payment goes towards interest? How much of the minimum payment goes towards the principal? If you do not want to share an actual balance or do not have a credit card, calculate these amounts using an imaginary credit card balance. My fake credit card would have a balance of $10,000. The minimum payment per month is determined based on my income. The minimum would be 5% of the $10,000. Two percent of the minimum payment would go towards interest. One percent of the payment would go towards the principle. 4. Now, examine the terms of one of your credit cards or...
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...University of Phoenix Material Credit History Worksheet Directions Identify the following factor descriptions to their corresponding C of credit. Highlight, bold, or underline the correct answer. 1. Jack and Jill want to buy a car. They are using another car for ___________ as a promise to pay. a) Capacity b) Capital c) Collateral d) Character e) Conditions 2. Under these _______________, you may still be approved with a cosigner. a) Capacity b) Capital c) Collateral d) Character e) Conditions 3. Henry has a history of not staying with a job for an extended period of time. Which of the C’s would a lender be looking at? a) Capacity b) Capital c) Collateral d) Character e) Conditions 4. Madaline is a stay-at-home mom seeking to start a home-based business. She would need a cosigner in order to qualify for a loan. What other C’s might she need for this loan? a) Capacity b) Capital c) Collateral d) Character e) Conditions 5. Lenders use a debt-payment-to-income ratio to evaluate this particular C. a) Capacity b) Capital c) Collateral d) Character e) Conditions Credit Score Resources: • Five C’s web page located at the following link: http://www.loanuniverse.com/credit.html. • Annual Credit Report website www.annualcreditreport.com. • Fair Isaac website (www.myfico...
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...Credit crunch and SME financing ----Take China as an example * * Shu Ruochen Noah 4063148 * Yuan Ziting Circle 40631 * Chou Xue Snow 40631 * * ABSTRACT ------------------------------------------------- SME are always important forces of social and economic development,and they play important roles in optimizing the economic structure, promoting innovation,easing social pressures and maintaining social stability.However, the world crisis was triggered by financial crisis in 2008 in USA, which has great impact on China’s economy, especially on SME.Since the credit crunch, SME are unable to obtain full production and operation funds needed timely,and Bank loans to enterprises are more cautious, so financing of SME will become more apparently difficult.Therefore, in order to solve the financing problems of SME, exploring development mode and long-term mechanisms which is adapt to economic structural has been an urgent strategic issues. * 1. Definition of credit crunch * A credit crunch is a sudden reduction in the general availability of loans (or credit ) or a sudden tightening of the conditions required to obtain a loan from the banks . * A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates . * 2. Background of Credit crunch. ------------------------------------------------- 2008 the financial crisis took place in USA...
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...Internship report on Credit Appraisal of NCC Bank Ltd. PREPARED FOR Ms Halima Begum SeniorLecturer Department of Business Administration Leading University, Sylhet PREPARED BY: Fathema Jannath ID: 1201010750 Department of Business Administration Leading University, Sylhet Date: July 11, 2013 Credit Appraisal Of NCC Bank Ltd. LETTER OF TRANSMITTAL Date: 11th July, 2013 To The Supervisor Department of Business Administration Leading University Sylhet Subject: Submission of Internship Report Dear Madam, I am grateful to you for the submission of the report on “Credit Appraisal of NCC Bank”, Elephant Road Foreign Exchange Branch in the completion of the requirement for internship. This is an excellent opportunity for me to acquaint more closely with the organization. The association and coordination of all respective officers & staffs with me are full of exciting, re-discovering and entertainment. During the period of doing this report I have discovered and gained new & practical feelings, observations and learning. I have my utmost effort to reflect experience, skill and knowledge, which I acquired at the time of working at NCC Bank. All of my efforts will be successful if the thesis paper can serve its purpose. I have tried my best to explain everything related with the Credit Appraisal in this paper. Yours faithfully Fathema Jannath ID: 1201010750 Department of Business Administration Leading University Sylhet ...
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...CREDIT RATING INFORMATION AND SERVICES LIMITED CREDIT RATING SCALES – BANK LOAN / FACILITY RATING LONG TERM RATING SCALES AND DEFINITIONS RATING Blr AAA (blr Triple A) (Highest Safety) blr AA+, blr AA, blr AA(blr Double A) (High Safety) blr A+, blr A, blr A(blr Single A) (Adequate Safety) blr BBB+, blr BBB, blr BBB(blr Triple B) (Moderate Safety) Blr BB+, blr BB, Bank Loan/ Facilities rated in this category are adjudged to carry adequate safety for timely repayment/ settlement. This level of rating indicates that the loan / facilities enjoyed by an entity has adequate and reliable credit profile. Risk factors are more variable and greater in periods of economic stress than those rated in the higher categories. Bank Loan/ Facilities rated in this category are adjudged to offer moderate degree of safety for timely repayment /fulfilling commitments. This level of rating indicates that the client enjoying loans/ facilities under-performing in some areas. However, these clients are considered to have the capability to overcome the above-mentioned limitations. Cash flows are irregular but the same is sufficient to service the laon/ fulfill commitments. Risk factors are more variable in periods of economic stress than those rated in the higher categories. Speculative/ Non investment Grade Bank Loan/ Facilities rated in this category are adjudged to lack key protection factors, which results in an inadequate safety. This level of rating indicates loans/ facilities enjoyed by a client...
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...The Importance of Good Credit Have you ever been turned down for a loan or an apartment lease and wondered why? It could be due to your credit history. Let’s face it–our credit says a lot about who we are. It is our financial report card, and can affect many aspects of our lives. Professional credit counselors at ClearPoint Credit Counseling Solutions agree that having a good credit history is imperative to leading a financially fit life. What is Credit? Credit is defined as a contractual agreement between a lender and a borrower in which the borrower assumes something of value, and agrees to repay the lender on a future date. How does it work? When you apply for credit (say a loan or a credit card), the lender has to decide if you are a good candidate for receiving the loan. The lender’s decision is based heavily on your credit history. They have to assess the level of risk involved if they are to extend credit to you. If you have displayed a poor repayment history, it is less likely that you will be approved for the loan or a line of credit. The lower your credit score, the higher your interest rate. Over the life of a mortgage or auto loan, higher interest rates will cost you thousands and thousands of dollars. If you plan to take out either of these types of loans or a new credit card, it would be wise to pull your credit reports to see where you stand and start making improvements now. Who actually looks at your credit record? You may be surprised to learn that it...
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...Cash Credit : Overviews Cash Credit is also known as Working Capital .Cash Credit is a facility to withdraw the amount from the business account even though the account may not have enough credit balance. The limit of the amount that can be withdrawn is sanctioned by the bank based on the business cycle of the client and the working capital gap and the drawing power of the client. This drawing power is determined, based on the stock and book debts statements submitted by the borrower at monthly intervals against the security by hypothecating of stock of commodities and/ or book debts. The excess withdrawal of cash is made generally on demand from the customer and the customer has to pay interest on the excess amount he/she has withdrawn. The Cash Credit facility is quite useful to those businesses where cash payment like wages, transportation,cash purchases are to be made and the receivables are not realized in time. Cash Credit : Process The following are the sequence of steps taken by the banks on receipt of completed application forms. 1. Application form is accepted and acknowledged. 2. Personal interview /discussions is held with the customers by the bank’s officials. 3. Bank's Field Investigation team visits the business place/work place of the applicant. (All the documents submitted are verified by the bank with the originals so as to ensure the authenticity of the same.) 4. Bank verifies the track record of the applicant with the common information sharing bureau...
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...Credit Management |Program |: |MBA |Class of |: |2007 | |Semester |: |IV |Sessions |: |33 | |Course Code |: |BKG 607 |Credit |: |3 Units | Objective The objective of this course is to provide the students with adequate knowledge about the management of Credit portfolio in banks. It will provide sufficient inputs to enable the student to develop an insight regarding the different phases of Credit management. |Reference Books |Author / Publication | |Credit Management |ICFAI | |Practical Banking Advances |H.L.Bedi and V.K. Hardikar/ UBS Publishers | |The Bank Credit Analysis |Jonathan Golin/John Wiley & Sons | |Frontiers in Credit Risk |Gordian Gaeta/ John Wiley & Sons | |Money, Credit and Capital |James Tobin/McGraw | |Credit Risk |Michael...
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...a well known private bank, which is “Southeast Bank Limited.” This program helps me to enlarge my analytical skills and scholastic aptitudes. During my internship period I got the opportunity to work in credit and I have interested to prepare my internship report on the credit department and also my supervisor Mr. Md. ShahanShah Molla allow me to prepare the report on my interested topic. 1.2. Objective of the Report: The study has been undertaken with the following objectives: To analysis the pros and cons of the conventional ideas about credit operation of a Bank. To have better orientation on credit management activities specially credit policy and practices, credit appraisal, credit-processing steps, credit management, financing in various sector and recovery, loan classification method of SEBL. To identify and suggest scopes of improvement in credit management of SEBL. To get an overall idea about the performance of Southeast Bank Ltd. To fulfill the requirement of the internship program under BBA program 1.3. Scope of the Report: The study focus on the following areas of Southeast Bank Limited: Credit recovery system of the SEBL Credit appraisal procedure of the Southeast Bank Ltd. Credit evaluation principles of the SEBL Credit management of the SEBL Procedure for...
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...Credit Crunch An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers. Credit crunches are usually considered to be an extension of recessions. A credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, which results in higher rates. The consequence is a prolonged recession (or slower recovery), which occurs as a result of the shrinking credit supply The global credit crunch, which has dominated financial news headlines over recent months, continues to wreak havoc across the UK. Since it made its way across the Atlantic last summer the credit crunch has taken its toll in all financial sectors, and has made things difficult for both lenders and consumers. Many lenders have been hit hard, because the crunch has resulted in increased difficulties in getting finance on the wholesale money markets and increased costs relating to inter-bank lending. This means that lenders are finding it more difficult and more expensive to raise the finance that they need to fund their lending. Over recent months an increasing number of consumers have found that trying to get any form of credit has become more difficult and expensive, and this is because of the action taken by lenders to try and protect themselves as much as possible from the effects of the crunch. Lenders have raised interest...
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...Part: FOUR Credit Management of The premier bank ltd. Part: Four Credit Management Credit Management: Credit management is a term used to identify accounting functions usually conducted under the umbrella of Accounts Receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for the business to remain financially stable. The process of credit management begins with accurately assessing the credit-worthiness of the customer base. This is particularly important if the company chooses to extend some type of credit line or revolving credit to certain customers. Proper credit management calls for setting specific criteria that a customer must meet before receiving this type of credit arrangement. As part of the evaluation process, credit management also calls for determining the total credit line that will be extended to a given customer. Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This includes gathering data on the potential customer’s current financial condition, including the current credit score. The current ratio between income and...
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...Ian W Marsh The effect of lenders' credit risk transfer activities on borrowing firms' equity returns Bank of Finland Research Discussion Papers 31 • 2006 Suomen Pankki Bank of Finland P.O.Box 160 FI-00101 HELSINKI Finland + 358 10 8311 http://www.bof.fi Bank of Finland Research Discussion Papers 31 • 2006 Ian W Marsh* The effect of lenders’ credit risk transfer activities on borrowing firms’ equity returns The views expressed are those of the author and do not necessarily reflect the views of the Bank of Finland. * Cass Business School, London, and Bank of Finland. E-mail: i.marsh@city.ac.uk. This paper was written while the author was visiting the Research Unit of the Bank of Finland. The Bank’s hospitality was exemplary and I am grateful to participants at the Research Unit’s Summer Workshop, the Bank of Finland Economics Seminar, Iftekhar Hasan, Tuomas Takalo, and Wolf Wagner for comments. Susan Yuska at the Chicago Fed was very helpful in guiding me through the Bank Holding Company Database. http://www.bof.fi ISBN 978-952-462-340-7 ISSN 0785-3572 (print) ISBN 978-952-462-341-4 ISSN 1456-6184 (online) Helsinki 2006 The effect of lenders’ credit risk transfer activities on borrowing firms’ equity returns Bank of Finland Research Discussion Papers 31/2006 Ian W Marsh Monetary Policy and Research Department Abstract Although innovative credit risk transfer techniques help to allocate risk more optimally,...
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...Report on Bank Asia Limited May 21, 2013 | Author: Jannatul Ferdous | Posted in Credit Management Table of Contents * 1 Introduction * 1.1 Structure of the Corporate Office * 1.2 Directors’ and Key Persons’ Profile * 1.3 Mission Statement of Bank Asia * 1.4 Corporate Objectives * 1.5 SWOT Analysis of Bank Asia * 1.5.1 Strength * 1.5.2 Weaknesses * 1.5.3 Opportunities * 1.5.4 Threats * 1.6 Values Considered as Guiding Factors * 1.7 Equity Formation * 1.8 Performance of the Bank * 1.8.1 Profit and Operating Results * 1.8.2 Deposit * 1.8.3 Advance * 1.8.4 Foreign Exchange Business * 1.8.5 Investment * 1.8.6 Dividend * 1.9 Special Features of the Bank * 1.10 Products and Services * 1.11 Correspondence Relationship * 1.12 Customer Service * 1.13 Department: Cash * 1.14 Department: Accounts * 1.15 Department: Credit * 1.16 Department: Foreign Trade * 2 Introduction * 2.1 Types of Credit Facility by Bank Asia * 2.1.1 Funded Facilities * 2.1.1.1 Over Draft * 2.1.1.2 Secured Over Draft * 2.1.1.3 Term Loan * 2.1.2 Personal Credit * 2.1.3 Non-Funded Facilities * 2.1.3.1 Guarantee * 2.1.3.2 Features of Bank Guarantee * 2.1.3.3 Syndicate Loan ...
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...& Laman, V.P. (2010)., the birth of the credit system has made the use of the documents covering credit transactions both imperative and important, such documents are known as credit instruments. While credit transaction need not be evidenced by written contract, nevertheless, it appears sufficiently clear that it is better than they are. Credit instruments are documents that serve as an evidence of debt, this defines the responsibility of the debtor to his creditor and the right of the creditor to collect from the debtor at the specified time. Bonds are promises of the payment of interest and principals to the holder at a particular time. It is a written or printed acknowledgment of debt. It is a certificate of liability or obligation. Bonds are debt and are issued for more than one year. Stocks are permanent invested capital contributed by the stockholders or owners of a corporation which are proved by certificates. It is a share of a company held by an individual. Miranda (2001) defined check as a written order drawn by a depositor, directing it to pay on demand a specified sum of money. Check is the most commonly used bill of exchange. It is a written, dated and signed instrument. Promissory note is the simplest form of a credit instrument. It is a written promise of an individual to pay a certain amount of money at certain time in the future to an appointed person or bearer. II. Kinds of credit instruments Credit instrument existed before coinage. In Assyria...
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