Loan Packaging
This is the presentation of the credit facilities that will be granted to a client. After thorough financial analysis and getting to know well the client and his / her business operations, you will be able to provide him / her the necessary credit facility for his / her financing needs.
The following are the basic types of loans that can be offered:
Credit line - used to finance working capital i.e. accounts receivables and inventory
Term loan - used for capital expenditures i.e. purchase of land, machinery or equipment; construction or renovation of building; reimbursement
Letter of credit / Trust receipt line - used as guarantee particularly for trade (import or export) transactions
FX Pre-settlement risk line - used in the sale and purchase of foreign exchange - spot and forward
Rediscounting line - used in rediscounting of post-dated checks or receivables
Back-to-back loan - this is against deposit, used usually for personal / investment purposes
Bills purchase line - credit facility for uncleared checks
Others - Consumer loans:
Auto loan
Housing loan
Personal and Salary loans
Tenor of long-term loans should be assessed based on the cash flow of the business. Financial projection and sensitivity analysis are required to be done to evaluate the repayment capacity of the business.
Interest Rate
Short-term loans usually have lower interest rates than long-term loans. Borrowers may opt to have interest rate that is repriced yearly or have it fixed for a certain period. Credit risk (interest rate fluctuation) is minimized or controlled for fixed-rate loan while an annually-repriced loan can have possible reduction of rate in the succeeding years especially if the economy or market is doing good.
As of November 2013, the average market rates are as follows:
For business loans
Short-term loan 6-7% p.a.
Long-term loan 7.0% for 1 year (rate is increased usually by 0.25% if fixed for a period i.e. 7.25% fixed for 2 years and so on)
Auto loan 7-8% (depends on the loan tenor)
Housing loan 6-8% (depends on the loan tenor)
Personal loan 1.25 - 2% per month
Loan against deposit - lending rate depends on the breakeven rate of the deposit used as security
The relationship of the client with the bank can affect the rate charged to the loan. A client with high deposit balances for a long period and has been loyal to the bank can enjoy a reduced rate. The basis of the lending rate to offer can be computed by knowing the profitability of the account. Account Profitability Analysis is a tool used by account officers to determine the overall profitability of the account. All the income from the products availed (deposits, insurance, investment, loans, etc.) are totaled to know the income and the return on risk assets of a particular account.
Other terms and conditions, and the additional requirements that must be complied will also be discussed in the loan presentation, which is usually written in the bank's credit offering memo.
This is the presentation of the credit facilities that will be granted to a client. After thorough financial analysis and getting to know well the client and his / her business operations, you will be able to provide him / her the necessary credit facility for his / her financing needs.
The following are the basic types of loans that can be offered:
Credit line - used to finance working capital i.e. accounts receivables and inventory
Term loan - used for capital expenditures i.e. purchase of land, machinery or equipment; construction or renovation of building; reimbursement
Letter of credit / Trust receipt line - used as guarantee particularly for trade (import or export) transactions
FX Pre-settlement risk line - used in the sale and purchase of foreign exchange - spot and forward
Rediscounting line - used in rediscounting of post-dated checks or receivables
Back-to-back loan - this is against deposit, used usually for personal / investment purposes
Bills purchase line - credit facility for uncleared checks
Others - Consumer loans:
Auto loan
Housing loan
Personal and Salary loans
Tenor of long-term loans should be assessed based on the cash flow of the business. Financial projection and sensitivity analysis are required to be done to evaluate the repayment capacity of the business.
Interest Rate
Short-term loans usually have lower interest rates than long-term loans. Borrowers may opt to have interest rate that is repriced yearly or have it fixed for a certain period. Credit risk (interest rate fluctuation) is minimized or controlled for fixed-rate loan while an annually-repriced loan can have possible reduction of rate in the succeeding years especially if the economy or market is doing good.
As of November 2013, the average market rates are as follows:
For business loans
Short-term loan 6-7% p.a.
Long-term loan 7.0% for 1 year (rate is increased usually by 0.25% if fixed for a period i.e. 7.25% fixed for 2 years and so on)
Auto loan 7-8% (depends on the loan tenor)
Housing loan 6-8% (depends on the loan tenor)
Personal loan 1.25 - 2% per month
Loan against deposit - lending rate depends on the breakeven rate of the deposit used as security
The relationship of the client with the bank can affect the rate charged to the loan. A client with high deposit balances for a long period and has been loyal to the bank can enjoy a reduced rate. The basis of the lending rate to offer can be computed by knowing the profitability of the account. Account Profitability Analysis is a tool used by account officers to determine the overall profitability of the account. All the income from the products availed (deposits, insurance, investment, loans, etc.) are totaled to know the income and the return on risk assets of a particular account.
Other terms and conditions, and the additional requirements that must be complied will also be discussed in the loan presentation, which is usually written in the bank's credit offering memo.