Relationship Between Valuation And Bank Loan

Relationship Between Valuation And Bank Loan

In fact, there are many different risks when lending in general and project-based lending in particular, stemming from many factors and can lead to failure to repay the debt when due. Therefore, in order to decide whether or not to accept a loan, commercial banks need to attach importance to credit analysis in general and project financial appraisal in particular.

In order to limit the high NPL ratio, the process of appraising investment projects is usually standardized and applied to the whole system in three steps as follows:

• Checking the completeness and rationality of the legal document set:

Legal records

Economic records

loans profile

Loan security records

See also: Project Evaluation Method Reduce 99% Risk

• Appraisal of borrowers:

The legal status and status of the borrower

History of enterprise formation, organizational structure, corporate governance

Current mode and situation of current business operations and business orientation

Financial situation of the business

Relations with credit institutions

See also: Business Appraisal

• Appraisal of investment projects:

Preliminary review and evaluation of the main contents of the project

Analyze the market and the output of products and services of the project

Assess the ability to supply raw materials and inputs of the project

Evaluate and comment on technical aspects

Appraisal of total investment capital and feasibility of loan plan

Evaluate the financial performance of the project

See also: Importance of Real Estate Valuations in Taxation 2020

On that basis, depending on each specific project with different characteristics, appraisers can analyze, evaluate and offer the conditions associated with lending, limiting risks, ensuring loan security. On that basis, bank leaders can consider the possibility of lending to each project.

Thus, through the valuation process, the new bank has a comprehensive view of the project; assessing the demand for total investment capital, capital structure and capital use situation, financial efficiency of the project as well as the projects ability to repay debts.

Indochina International Investment & Appraisal Joint Stock Company (INA)

• Address: 121 Nguyen Van Troi, Ward 12, Phu Nhuan District, Ho Chi Minh City
• Hotline: 0934 252 707 / Email: info@inavn.vn