6 C's of Credit

Because debt financing is used in most if not all RE transactions, mortgages are necessary for eliminating uncertainty; Not only for the borrower but the lender as well. The lender can be certain of what risks are involved and this allows them to determine the risk premium in the interest rate. The borrower benefits immensely from the mortgage as it reduces the cost of borrowing, it details financial rights and obligations, and increases chances of a positive outcome.

| Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:Answer

This is why they'll visit a bond agent. Each office has their own rules and standards, but often collateral can include jewelry, cars, personal credit or a home.

Creditors normally focus on the liquidity or solvency of the borrower in terms of current ratio and quick ratio, which indicate whether the company has enough working capital to cover the short-term debts. Myer will enter into a syndicated facility agreement to refinance the existing borrowings of the Myer Group. Besides, creditors are interested in the business risks the company might undertake, which indicate the possibility that the company might be unable to pay back the long-term liability in the future. From this point, the expectation on high return on investment and high profitability in the long run make the creditor’s interest aligned with shareholders’ value.

They are interested in the company’s ability to pay obligations when they become due, especially during the operating cycle.

Most of our clients do not require any collateral. This is what our clients get to enjoy; we are indeed different from the rest.

By securitizing the receivables, a larger organization can convert its accounts receivable into cash at once. Hence, individual receivables are combined into a new security and are then sold as an investment instrument. Since securities are backed by a liquid form of collateral, a securitization can result in an extremely low interest rate for the issuing entity. Criterions in ASC 860 states that, transfers in securitization transactions must be evaluated for sale accounting treatment. In addition, they must be evaluated for consolidation by the GAAP criteria, set fourth at ASC 810. Moreover, Securitizations are popular because investors want to acquire collateralized securities and firms with large amounts of receivables have incentives to

The Lawsons’ efficiency ratios are another section the bank will find troubling. The company’s age of payables has nearly tripled over the last four years. This can be detrimental to the company’s image and reliability including their reliability toward the bank if granted the loan. Along with increasing age of payables is increasing age of receivables and age of inventory. Indicating that Mr. Mackay is taking longer to collect his receivables and that he has purchased too much inventory. Too much inventory results can result in further issues

Asymmetric information in lending is a huge risk. When there is misinformation from a lender to a borrower, this can cause a few different problems to arise; for example misinformation about job security or credit history from a borrower to a lender can result in late or missed payments, fraudulent spending of the money lent or the lending amount to be turned as bad debt. Specialization is a tool used for risk management. Specialization in lending helps reduce risk by gathering valuable and accurate information about the borrower. It

Remember, a bank’s assets must always equal its liabilities. This is most likely the reason why the first steps into applying for a loan are credit checks. A bank has a lot at stake; if the bank hands out a loan to someone who does not have good credit history it’s a big possibility they would lose out on a lot of valuables.

Must be obtained by possession. There must be an agreement by the debtor granting the creditor a security interest in particular property(collateral) or the secured party must have possession of the property.

To find who is bearing the risks of receivables ownership, an analyst should carefully examine the details of the securitization or factoring transactions. Moreover, if the transactions are considered borrowed where the lender does not directly bear the risk of owning the receivable/security, then the ownership risks should be retained by the company. Essentially, companies who are facing different economic realities may choose similar accounting treatment being that it will satisfy the requirement under GAAP

Secured personal loans require the borrower to provide a financial guarantee to aid the lender in the event of a default. This could be in the form of cash or could also be secured in other forms, such as a vehicle, equity in property or valuables. Secured personal loans usually have lower interest rates as the financial guarantee provides increased protection for the lender against default risk. Secured loans tend to be more attractive to borrowers with a poor credit

Collateral is a type of defense which is necessary by a few investor, or it is a piece of land or belongings which is similar to your loan price obtaining from the creditor. In case you are the residence proprietor with a good acclaim history and acclaim ratings you might not require any security occupied in the home improvement loans UK. Usually the security engages vehicle title, bonds, stocks, jewelry, electronics and belongings. Some misunderstanding are also there to get hold of the secured residence development loans, although these loans are simply accessible to each person because as compare to the unsecured loans you are capable to apply even if you don't have fine credit rating, however the investor narrowly appraise your all papers and acclaim scoring and review that moreover you are able to return the loan or

As Jackie Patrick, loans officer for the Commercial Bank of Ontario, the key issue is whether or not I will accept or reject Mackay’s request for a bank loan and line of credit. My key objective is to develop a thorough understanding of the facts presented in the case in order to make an informed decision that will best serve the interest of the Commercial Bank of Ontario, myself as the newly appointed loans officer, and of course my client Mr. Mackay.