Professional Documents
Culture Documents
Setting Credit Limit
Setting Credit Limit
3. Product or Services – Does your product or services lead or lag in its market?
Does your product or services give you sufficient market leverages against
your competitions?
4. Kind of customers or target market – The class of customers (or the market
for your product or services whether belonging to the high-, middle- or low-
income group will do a large extent influence the collection policies in you will
adopt.
1. Target Markets – This is where the lending unit identifies the client base and
credit facilities it will pursue.
2. Origins - The credit process begins with a thorough analysis of the borrower’s
creditworthiness, or capacity and willingness to repay the loan.
3. Evaluation - After the credit analysis is completed and borrower has been
determined to be an acceptable risk, the credit officer proposes a loan structure
for approval that preserves the strengths and protects against identified
weaknesses of the borrower.
4. Negotiation – Includes the credit officer’s assessment of the client’s optimal loan
structure, including loan amortization, covenants, reporting requirements – the
underwriting elements.
5. Approval - Depending on the results from the underwriting process, an
application will be approved, denied, or sent back to the originator for
additional information. If certain criteria don’t match according to the rule
engine set in the system, there can be an automatic change in the parameters,
such as reduced loan amount or different interest rates.
6. Documentation - Since lending is highly regulated, the quality check stage of
the loan origination process is critical to lenders. The application is sent to the
quality control team, that analyze critical variables against internal and external
rules and regulations. This is the last look at the application before it goes to
funding.
7. Disbursement - Most consumer loans are disbursed once the loan documents
are signed. Business loan, line of credit and second mortgage loans may take
additional time for legal and compliance reasons. Lender issues a check or
demand draft, which the client can receive from the bank branch or is couriered
to their address.
8. Administration - If there are special payment plans, compare scheduled
payment dates to the dates on which payments are actually received, and
contact customers as soon as it appears that they will miss a scheduled payment
date. This level of monitoring is required to keep customers from delaying their
payments.
9. Workout Situation - Credit workout, or working with problem loans, should be
covered in detail in the bank’s credit policy. The process for dealing with
borrowers whose capacity to repay is in doubt or has become impaired is the
subject. When a loan is placed on the watch list, an action plan should be agreed
internally and with the borrower as soon as possible. The action plan should
include specific actions or goals to be achieved by the borrower and a specific
time frame for their achievement.
10. Repayment/Loss - If all collection techniques have failed, this includes
completing a credit memo approval form in the amount of the invoice(s) to be
written off.