Credit Rating & Analysis
Credit analysis is one of the statistical technique for calculating the creditworthiness of a business or an organization.
The Credit Analysis is done in two scenarios-
- When a large company has to issues the Bonds
- When an organization wants to renew its Commercial Loan
Techniques used for Credit Analysis/Financial Analysis-
•Ratio and trend analysis
•Creation of Projections
•Detailed analysis of cash flows
•An examination of Collateral & other sources of repayment
•Evaluation of Credit history and management ability.
•Analysation of the probability of a borrower's default on its debts and also the severity of losses in the event of default.
•Measurement of repayment ability or Debt Service Coverage Ratio
•Analysation of the cash generated by a business (before interest expense and excluding depreciation and any other non-cash or extraordinary expenses).
Objective of credit analysis-
•To look at both the borrower and the lending facility being proposed
•Estimating the probability of the default by the borrower at a given confidence level over the life of the facility
•Estimating the amount of loss that the lender would suffer in the event of default
•To assign a risk rating.
ARK offers extensive services in the area of Credit Analysis & Rating which includes-
•Gathering information
•Detailed study of financial briefings like earnings, savings, payments and purchase of the company or individual and recommend other useful financial activity for further plans
•Assessment, analysis and interpretation of complicated Financial information
•Undertaking Risk Assessment Analysis to minimize bad debt risk and maximize accounts receivable collections.
•Keeping company credit exposures within set risk bearing limits
•Using credit-scoring systems for Small Credit amounts (such as small unsecured personal loans)
•Keeping abreast with all important issues like legal, market risk and compliance issues
•Guiding the client in the matter of enhancement of the quality of credit applications
•Making recommendations about procedural/policy changes.
•Compile reports regarding finance and credit data.
•Managing record, transaction and other office procedures
•Complete loan applications, including credit analyses and summaries of loan requests, and submit to loan committees for approval.
•Review individual or commercial customer files to identify and select delinquent accounts for collection.
•Reconcile customer statements/billings.
•Conduct collection calls and customer visits to collect Accounts Receivables.
•Market, train, counsel, advise, and communicate credit department policy and procedures to company personnel.
•Generate financial ratios, using computer programs, to evaluate customers' financial status.