Credit Appraisal: Validation of proposal, Dimension of Credit Appraisal, Structuring of loan document

Credit appraisal is the process by which a lender evaluates a borrower’s creditworthiness and the viability of the proposed credit facility. The credit appraisal process involves various stages, including validation of the proposal, dimension of credit appraisal, and structuring of loan documents.

Validation of Proposal: In the validation of the proposal stage, the lender verifies the borrower’s credentials, such as their financial position, credit history, and business operations. This involves reviewing the borrower’s financial statements, tax returns, and other relevant documents. The lender may also conduct a background check on the borrower to assess their reputation and track record.

Dimension of Credit Appraisal: The dimension of credit appraisal involves assessing the credit risk associated with the proposed credit facility. This involves analyzing various factors, such as the borrower’s financial position, credit history, industry outlook, and market conditions. The lender may also use various credit scoring models and ratios to evaluate the borrower’s creditworthiness and ability to repay the loan.

Structuring of Loan Document: The structuring of loan documents involves drafting the terms and conditions of the credit facility. This includes determining the loan amount, interest rate, repayment schedule, collateral requirements, and other key terms. The lender may also incorporate covenants and conditions to ensure that the borrower complies with certain requirements, such as maintaining a certain level of financial performance or providing regular financial reporting.