Elsevier · Glantz, M: Navigating the Business Loan · Chapter 2: How Banks Evaluate Your Loan Application

Chapter 2: How Banks Evaluate Your Loan Application

PDFs

Illustrative Example: Credit Investigations

Brief Description: Commercial credit decisions, sources and types of financial and other credit information, adequacy of information, frequency of credit file review or update, how to obtain the maximum credit information from banking sources, evaluating credit and financial information assembled and making the decision  to sell or not to sell"  and  on what basis.
NBL2 Ch 2 Credit Investigations B


PowerPoint Presentations

Debt Restructuring
Structuring Loan Agreements Post Restructuring
Non-Performing Loans
How To Write A Credit Review


Excel Sheets

BIS Project Finance Risk Rating System

Brief Description: Project finance risk rating is a supervisory slotting Bank for International Settlements (BIS) risk rating system developed in Excel by the authors.  Project finance is defined by the International Project Finance Association as the financing of long-term infrastructure, industrial projects, and public services based on a nonrecourse or limited recourse financial structure in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. In such transactions, the lender is usually paid solely or almost exclusively out of the funds generated by the contracts for the facility’s output, such as the electricity sold by a power plant. Project finance is often more complicated than alternative financing methods. Risk identification and allocation is a key component of project finance. A project may be subject to a number of technical, environmental, economic, and political risks, particularly in developing countries and emerging markets. The following modules are included within this system:  market conditions: financial ratios, stressed conditions, financial structure, currency risk, political risk government support, legal and regulatory environment, support acquisition, contract  enforceability, design and technology risk, real options protection (loss hedge), construction risk, completion guarantees,  operating risk, off-take risk, supply risk, assignment of contracts and accounts and pledge of assets, l ender’s control over cash flow, strength of the covenant package, and reserve funds.

Source:  M. Glantz and R. Kissell; Multi-Asset Risk Modeling Techniques for a Global Economy in an Electronic and Algorithmic Trading Era; 2014; Academic Press ,Chapter 10 Page 357

NBL3 CH  2 BIS Project Finance Risk Rating System


BIS Real Estate Risk Rating System

Brief Description: Project finance risk rating is a supervisory slotting Bank for International Settlements (BIS) risk rating system developed in Excel by the authors.  Project finance is defined by the International Project Finance Association as the financing of long-term infrastructure, industrial projects, and public services based on a nonrecourse or limited recourse financial structure in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. In such transactions, the lender is usually paid solely or almost exclusively out of the funds generated by the contracts for the facility’s output, such as the electricity sold by a power plant. Project finance is often more complicated than alternative financing methods. Risk identification and allocation is a key component of project finance. A project may be subject to a number of technical, environmental, economic, and political risks, particularly in developing countries and emerging markets. The following modules are included within this system:  market conditions: financial ratios, stressed conditions, financial structure, currency risk, political risk government support, legal and regulatory environment, support acquisition, contract  enforceability, design and technology risk, real options protection (loss hedge), construction risk, completion guarantees,  operating risk, off-take risk, supply risk, assignment of contracts and accounts and pledge of assets, l ender’s control over cash flow, strength of the covenant package, and reserve funds .

Source:  M. Glantz and R. Kissell; Multi-Asset Risk Modeling Techniques for a Global Economy in an Electronic and Algorithmic Trading Era; 2014; Academic Press ,Chapter 10 Page 357


Commodity Finance Risk Rating

Brief Description: This is a must technology for lenders approving commodity finance and international transaction for their customer. Developed originally by the Bank for International Settlements as a supervisory system and Pillar 2, Basel III the commodity finance risk rating system embodies an significant element in bank audits - federal, state and internal.  The structured nature of the commodities finance is designed to compensate for the weak credit quality of the borrower. The exposure’s rating reflects the self-liquidating nature of the transaction and the lender’s skill in structuring the transaction. Commodities finance is defined as short-term financing for the acquisition of readily marketable commodities that are to be resold and the proceeds applied to loan repayment. Commodities finance deals with structured short-term lending to finance reserves, inventories, or receivables of exchange-traded commodities, such as crude oil, metals, and crops, whereby exposures are repaid from the proceeds of the sale of the commodity and the obligor operates no other activities, owns no other material assets, and thus has no independent means to satisfy the obligation. Modules include: Financial Measures (degree of over-collateralization); Political and Legal Environment (country risk, mitigation of country risks); Asset Characteristics (liquidity and susceptibility to damage); Strength of Sponsor (financial strength of trader, track record, including ability to manage the logistic process, trading controls and hedging policies, quality of financial disclosure); and Security Package (asset control, insurance against damages). Source:  M. Glantz and R. Kissell; Multi-Asset Risk Modeling Techniques for a Global Economy in an Electronic and Algorithmic Trading Era; 2014; Academic Press, Chapter 10 Page 357

Source:  M. Glantz and R. Kissell; Multi-Asset Risk Modeling Techniques for a Global Economy in an Electronic and Algorithmic Trading Era; 2014; Academic Press, Chapter 10 Page 357

NBL3 Ch 2 Commodity Finance Risk Rating


Loan Pricing Model

Brief Description: Net borrowed funds approach, stochastic model, return on assets, return on equity, risk adjusted return on capital, rate spreads, fees, deposit balances, fixed and variable costs, target return(s).
NBL3 Ch 2 Loan Pricing Model