Explain How To Evaluate A Commercial Loan?
QUESTION 3 :Explain how to evaluate commercial loan.
A commercial loan is a debt-based funding arrangement between a business and a financial institution, typically used to fund major capital expenditures or to cover operational costs that the company may otherwise be unable to afford. Expensive upfront costs and regulatory hurdles often prevent small businesses from having direct access to debt and debt and equity markets for financing. Similar to consumer credit, smaller businesses must relay on other lending products, such as a line of credit, unsecured loans or term loans.
Commercial loans are granted to a variety of business entities, usually to assist with short-term funding needs for operational costs or for the purchase of equipment to facilitate the operating process. In some instances, the loan may be extended to help the business meet more basic operational needs, such as funding for payroll or to purchase smaller supplies that are used in the production and manufacturing process.
While a commercial loan is most often thought of as a short-term source of funds for a business, there are some banks or other financial institutions that offer a renewable loan. This allows the business to get the funds it needs to maintain operations and to repay the loan within its specified time period. After this, the loan may then be …show more content…
Business loans are processed as either corporate or commercial depending on the amount, however, they both call for a rigorous approval process in order to pass the risk manager's assessment--and every good bank has a good risk management department. While every bank has its own evaluation process, there are some common aspects to every commercial loan request. Ultimately as the portfolio manager or reviewer it is your job to 1.) make sure the bank accepts the customer who will repay the debt, and 2.) make sure the bank rejects making a loan to a customer who will default on the
A commercial loan is a debt-based funding arrangement between a business and a financial institution, typically used to fund major capital expenditures or to cover operational costs that the company may otherwise be unable to afford. Expensive upfront costs and regulatory hurdles often prevent small businesses from having direct access to debt and debt and equity markets for financing. Similar to consumer credit, smaller businesses must relay on other lending products, such as a line of credit, unsecured loans or term loans.
Commercial loans are granted to a variety of business entities, usually to assist with short-term funding needs for operational costs or for the purchase of equipment to facilitate the operating process. In some instances, the loan may be extended to help the business meet more basic operational needs, such as funding for payroll or to purchase smaller supplies that are used in the production and manufacturing process.
While a commercial loan is most often thought of as a short-term source of funds for a business, there are some banks or other financial institutions that offer a renewable loan. This allows the business to get the funds it needs to maintain operations and to repay the loan within its specified time period. After this, the loan may then be …show more content…
Business loans are processed as either corporate or commercial depending on the amount, however, they both call for a rigorous approval process in order to pass the risk manager's assessment--and every good bank has a good risk management department. While every bank has its own evaluation process, there are some common aspects to every commercial loan request. Ultimately as the portfolio manager or reviewer it is your job to 1.) make sure the bank accepts the customer who will repay the debt, and 2.) make sure the bank rejects making a loan to a customer who will default on the