Over the last eleven articles, we have covered various aspects of the Credit Score and credit history, and their correlation with the Loan Approval process. In the last of this 12-part series, we take a close look at the Loan Evaluation process undertaken by Banks and Financial institutions for companies.
The Loan Evaluation Journey for Companies
Step 1: Pre-screening of the Loan application
When you are applying for a loan, the lender before moving forward, will pre-screen your loan application by checking for some basic aspects of your business. These aspects could include turnover / revenue, nature of business, operations, business plan, etc. If these basic aspects are a part of the lender’s credit policy, then the application moves forward to the next step.
Step 2: Past Application Record Check
An internal check is performed where the Bank or the Financial Institution will eliminate or restrict disbursal of applications which were earlier rejected for fraud, misrepresentation, etc.
Step 3: Analysis of the Company Credit Report (CCR)
The CCR contains details of all the credit facilities availed by your company as well as the credit details where you are a guarantor/ co-applicant. Any prior suit-filed or wilful default cases (which will reflect in your CCR) may not be looked upon favorably by lenders.
This enables the lender to assess your repayment capability.
Step 4: Analysis of Financial Statement and other documents
The lender does a detailed analysis of the Balance Sheet of the company (and may be even of subsidiaries where applicable). The lender evaluates the debt-equity ratio, capital expenditure, etc. Depending on the type of commercial entity, the lender checks that the license and company registration, depending on the type of commercial entity, are in place and valid.
Step 5: Verification
At the last leg of the loan evaluation process, the lender conducts a verification of the business premise, checks for the authenticity of the documents and proofs submitted by the company.
As you may be aware, the Loan application process for a company is influenced not only by the company’s financial records, but the promoters as well as their subsidiaries (in certain cases). Before seeking additional credit, it is advisable to have a re-look at the company books and your Company Credit Report. To check your CIBIL CCR, and any discrepancy therein, please click here.
Remember: Your credit statement today affects your financial health tomorrow.