Credit Risk Analysis

It refers to the assessment of a loan proposal from different point of view to decide not.
whether the bank should go for finance or not.

Credit Risk Analysis helps the banker to ensure selection of right type of loan
proposals/projects/enterprise and right type of a borrower.

Principle Risk Component

Financial Risk

Business Risk/Industry Risk

Management Risk

Technical Risk

Relationship Risk.

Security Risk

Considering the principle risk component assessment occurs from following point of view-

Financial Aspect-

Borrowers contribution of the business.

Cash Inflow and Cash Flow statement.

Sales Forecast

Balance sheet

Profit & Loss Account

Relationship & Marketing Aspect-

Marketability of the product

Scope of market expansion

Utilization of limit

Account conduct

Possible threat of competition.

Business/Organizational Aspect

Size of business

Age of business

Business Outlook

Industry Growth

Competition

Barriers to Business

Managerial Aspect Ownership

Experience of the borrower
Educational Background
Sincerity, Honesty & Integrity
Ability of the management to run the project efficiently
Succession
Team work.
Technical Aspect

Location of the business

Infrastructure

Machineries

Security Aspect Security Coverage

Collateral Coverage and Support
In Addition with this, the following risk areas should be addressed during the risk analysis

Borrower Analysis

Industry Analysis

Supplier/ Buyer Analysis

Projected Financial Performance

Mitigating Factors

Loan structure