How the banks evaluate the SME application? (lend the SME)
There are many things the bank evaluates to before taking a decision of approving or rejecting the loan application some of these things are:
- The 5Cs
- A) – character.
- B) – Collateral: is the second way out which the bank concern about because in case of bankruptcy the bank will sell these assets to get the loan back, so even the bank pay a good attention in evaluating the assets and the depreciation of it during the loan period
The loan security cheese is also collateral which the bank can get the money back by file a case in case of bankruptcy.
- C) – condition: there are two types of the condition:
1- Internal condition: which refer to the bank policy in issuing and evaluating the loans?
2- External condition: which refer to the central bank policies and the gov. financial policies such as increasing the inflation rate or the LIBOR rate …..etc. which affect the bank policies
- D) – Cash: The bank pay attention for the first way out of the loan which is CASH, cash flow from the operation
- E) – Capital.
- F) – Credit reports: Credit report is a detailed list of your credit history because through the credit report the lender can see the financial history and how the managers manage the company and also it is an indicator to the future
- J) – Capacity: it the eligibility of the firm to repay the loan amount plus the interest rate on time
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