Generally, the loan accommodation given to entities are based on the latter’s needs in business. In this regard, the needs will be based on the nature of the business as assessed by the bank. In the usual banking practice, the following are the pre-qualifying documents which are required by the bank before a loan will be extended:
I. Collateral – Accepted collaterals may be in the form of real property, chattels (machineries or fixtures), placements and deposits of the bank.
a) Real property – this is the most secured interest which is regularly accepted by banks as collateral. In case the loan will be approved on the basis of the real property as collateral, the bank will usually grant loan which is equivalent to 60% of the value of the property as assessed by an internal appraiser of the bank. In case the property has improvements, such as building, the real property must be insured against fire.
Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations against real estate shall not exceed 75% of the appraised value of the respective real estate security, plus 60% of the appraised value of the insured improvements, and such loans may be made to the owner of the real estate or to his assignees.
b) Chattels – this is also considered as an accepted secured interest. However, corporations are discouraged to offer chattels as collaterals as these do not have long-term value, unlike real property which increases in value every year. In case the loan will be approved on the basis of the chattel as collateral, the bank will usually grant loan which is equivalent to 50% of the value of the property as assessed by an internal appraiser of the bank.
Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations on security of chattels and intangible properties such as, but not limited to, patents, trademarks, trade names, and copyrights shall not exceed 75% of the appraised value of the security, and such loans and other credit accommodations may be made to the title-holder of the chattels and intangible properties or his assignees.
c) Deposits – this is the most convenient collateral which can be offered by the borrower to the lender. In case the loan will be approved on the basis of the existing deposits as collateral, the bank will grant the loan which is equivalent to 90%-100% of the deposit.
II. Articles of the Incorporation, By-laws, SEC Certificate of Incorporation - This will inform the bank of the borrower’s background, including the company history, nature of its business, products being offered, and the company’s ownership/management.
III. Financial statements for the past two (2) to three (3) years – These documents determine the financial standing of the entity. Cash flows will be reviewed to determine whether the entity is able to cover short term and long term debts. This is based on Section 40 of the General Banking Law of 2000 wherein the bank may demand from its credit applicants a statement of their assets and liabilities and of their income and expenditures and such information as may be prescribed by law or by rules and regulations of the Monetary Board to enable the bank to properly evaluate the credit application which includes the corresponding financial statements submitted for taxation purposes to the Bureau of Internal Revenue. The bank will usually request the applicant to wait for six (6) months to determine whether the applicant is qualified for the loan accommodation or not. The six-month period will provide time for the bank to make an appraisal of the property being offered as collateral and provide a credit investigation of the company through plant visits and research.
It is customary in all banking institutions to execute a credit investigation report wherein it will provide the bank with facts to determine whether the applicant is financially qualified to be given a loan accommodation. The credit investigation report is considered an internal confidential document which must not be furnished to the client.
Nevertheless, the loan accommodation will be based on the value of the collaterals as appraised by the bank (lender).
No comments:
Post a Comment