Applying for a Bank loan ?


I remember hearing stories how during the good old days did the Bank assessed its loan applications. The Manager would ask the applicant two questions:

.1 What is name of your father ? If he is a con men or a bankrupt this may be the end of the application .

.2 What security can you offer to the Bank?

From the answers , the old Banker seldom makes much serious mistakes in assessing loans and bad debts were low .

Gradually as the bad old days sets in the Manager throws in a 3rd question, what is in for him. Such a thing had done a lot of damage  and the Banks were left with huge bad debts. I hope such a Mangers are long gone.

Present Bank Managers are trained to look at not only the credit worthiness of the applicant but he also assesses the worthiness of the Company.

What does the Bank specifically looks for when assessing your application? Mr Phang Yew Kiat, the General Manager (Singapore and Malaysia) of Standard Chartered says he looks at the 7 C’s of the SME.

.1 Characters—reliable, transparent, with good credit history

.2 The condition the business is in?

.3 Its capacity for growth

.4 Commitments of the owner to the business

.5 Control over the day to day business

.6 Collateral offered. Still here.

7 Whether SME bosses exercise common sense when assessing risks and investment opportunities.

More details here:

By Jonathan Kwok, Strait Times (Singapore).

SMALL and medium-sized enterprises (SMEs) need to demonstrate the right business attitude, have the capacity to grow and have managers in command of day-to-day operations, if their loan applications are to succeed.

According to Mr Phang Yew Kiat, Standard Chartered’s general manager of SME Banking in Singapore and Malaysia, bankers also need to see that company owners have a transparent character, exercise prudent risk management and have a strong commitment to the business before giving the thumbs up to a business loan.

Addressing about 400 SME bosses and staff at the half-day Enterprise Development Conference 2010 at Concorde Hotel, he said: ‘The fundamental question we will raise to (prospective) borrowers will be: How are you going to control and mitigate the associated risks to the transaction?’

Mr Phang outlined what he termed the ‘seven Cs’ that go towards making a successful bank loan application.

They comprise the character of the owners, who must be reliable, transparent and have good personal credit histories; the condition that the business is in, including its financial health; its capacity for growth; the commitment of the owners to the business; control over the day-to-day running of the business; the collateral that is being put up for a loan; and whether SME bosses exercise common sense when assessing risks and investment opportunities.

He added that commercial banks would be reassured if an SME had managers working alongside the main boss, and would be particularly impressed by a professional set-up with many talented individuals.

Apart from securing adequate financing, SME bosses needed to attract top talent if they wanted to continue to grow, Mr Phang told The Straits Times.

‘Very often, SME owners like to bring in people who listen to them on how to execute instructions. But there comes a point where you won’t be able to grow if you don’t have talented people who can effectively make decisions when you’re not there,’ he said.

Conference speaker Wee Chin Chuan, a director at Oriel Management Consulting, said banks tended to steer clear of firms with poorly drafted business plans which failed to articulate how cash was to be generated and repaid.

He pointed out that companies reduced their chances of a loan approval if they flooded multiple banks with applications.

‘This gives financial institutions the impression that the company is hungry for money, and could be in trouble… It should only market to suitable financial institutions, and could get advice on this from consultants or the Enterprise Development Centres,’ he said.



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