Object Finance Analysis Forex

Credit according to the traditional concept, is defined as the right of the debtor’s creditors receive anything, as you have confidence in the commitment to pay or return.

From a legal standpoint, the claim by law, trade and economy is the right of a person called a creditor has to bind to another, the debtor to pay. In fact there are multiple concepts, but more suited to our times and from the financial point of view is that credit is a risk operation or transaction in which the creditor (lender) trust in exchange for a guarantee in the policy credit or debtor (borrower), with the assurance that the latter will in future with their obligations to repay the capital received (debt repayment) plus tacitly agreed interest (debt service)

2. TYPES OF CREDITS

There are many types of loans, the most traditional in the financial system for commercial loans to micro entrepreneurs, consumer and mortgage loans.

? commercial credit.

Are those direct or indirect loans granted to individuals or corporations for the financing of production and marketing of goods and services in its different phases.
Also considered within this definition, loans to individuals through credit cards, leasing or other financing.

? MICRO CREDIT

Are those direct or indirect loans granted to individuals or legal entities for the financing of production activities, trading or service provision.

? CONSUMER CREDIT

Are those loans granted to natural persons in order to meet the payment of goods, services or costs related to a business.
Also considered within this definition, loans to individuals through credit cards, leases and any other type of financial transaction.

? residential mortgage

Are lines of credit for natural persons to the acquisition, construction, renovation, remodeling, expansion, improvement and subdivision of home ownership, such claims are covered by mortgages granted duly registered in public records.

3. IMPORTANCE

The role of credit in the economy is of great importance, because, among other things, is a powerful tool in the process of economic recovery, as it is by borrowing one of the most effective ways such as encouraged the development of an economy.

Without doubt the quality of a country’s economy is observable, among other indicators, through the quality of its financial system and credit services that it offers various economic agents.

We can also mention that only through adequate credit schemes will be possible for the economy to regain some much needed dynamism today, this is intended to provide a solution, among others, the work needs development. It is therefore necessary to create the foundations for a comprehensive financial system that promotes the growth of various sectors of the economy.

Credit has been an engine of economic recovery. To mention one example, for every home being built is generated activity by about 40 branches of the economy, and 5 direct jobs and many more indirectly.

As seen above, one can conclude that the existence of credit is a factor that should lead to strengthen economic development strategies.

4. CREDIT POLICY

There are different rules that any financial institution established with the purpose of administering the loans, we also consider the importance of before accepting or performing any transfer of funds, a detailed study of the solvency and assets of the customer in order to know what level of risk taken in the operation. Here are some policies in detail:

Individuals
When the holder is an individual transaction, the documents that we ask the entity will be:

a. Id
Voter registration card or ID, tax identification number (RUC)

b. Income support
• Working dependent
- Latest payslips
- Statement of income last year.
• Working on own account
- Latest tax returns
- Sales Tax Quarterly Returns
In both cases, and if in the informal labor abound, be requested other evidence of income (business license, bank statements, etc.).

c. Heritage documents
- Deeds of ownership
- Declaration of property. This statement computes all that wealth does not appear deed or possess, but which do not present the deed. You can take into account in the assessment of the operation, though not fundamental point, everyone movable assets worth review, auto, motorcycle, art, jewelry, etc..

d. Signed application to the operation analysis
This is an essential requirement because without it the body cannot check certain files of negatives and debt.
Once the entity has all the documentation indicated, proceed to the completion of analysis, taking this as a goal to answer the following question: If the client does not pay, where do you collect?. If after performing this analysis, the institution has no clear answer or it is unsatisfactory, reject the transaction or request further guarantees or guarantors.

5. Steps that the financial institution in the analysis of legal persons.

i. Negative check files. These are the same for natural persons legal.
ii. Checking through the writings of empowerment of the effect of these and of the powers of proxies.
iii. Through fiscal and accounting documents will proceed to the analysis of key ratios of the company. On the other hand, proceed to see what has been its evolution in recent years. It will check the evolution of the net sales of our fixed costs, variable staff costs and composition of the workforce, sales expense, indebtedness on turnover, sales per employee, etc. Once these calculations on the actual financial statements, will be what the company’s position in the market, major suppliers and customers, as well as its specific gravity. Finally, prepare a cash-flow of the company to see what your real cash and how it will affect the payment of the operation. If all these are correct, compared to general industry, the transaction will go forward.
iv. Checking the security of both the company and the employer, so determining which firms and whether or not personal guarantors. If the company provided real estate collateral, to be verified charge status through the Land Registry.

When discussing corporate finance should be aware that is not the same fund an operation that will make the company more competitive, and therefore can grow sales, to finance a new office building, non-productive fixed assets.

6. GENERAL NOTES TO REMEMBER

° at credit institutions like the owner of the risky operation of their money, that is, finance less than 100%. As a rule, is financed by 60% and 80% depending on the type of operation, the destination and the holder.

Do not often part findable tax is subject to the acquisition of goods or services to be financed (except for leasing operations)

• Moreover, the analysis always influences the customer’s knowledge, so that is good to have maintained business relationships prior to the application of the operation. A good career can make a transaction, objectively be denied to a particular client, be granted. An entity, without knowing anything, not you going to finance, because we must not forget that people make up the bank.

• Never should give false information to an entity when we ask an active operation. If reality is bad, just need guarantors, or should we settle for a small loan, but in any case we can always talk and explain our needs and ability to compromise. Trying to deceive the bank does not usually give good results for several reasons. One analyst sees hundreds of transactions per year, so easily will identify inconsistencies, have customer data from our own layer or sector, as well as a series of contacts that you will be able to inform us. If the entity in question detects that you try to cheat, will not trust what they say, so it is likely that the proposed transaction is rejected and we have closed that door forever.

So far we have presented the operation as if it were an isolated operation, but more and more institutions that want customers, not transactions. We will be forced to link us to them through other operations that are prerequisites for the granting of the principal. This so called cross selling.

7. THE CREDIT DEFAULT

Portfolio becomes heavy, because customers have breached their undertaking to pay, the delinquency is due to a bad credit rating, in terms of information, warranties and mismanagement.

Thus the basis of this factor must be taken into account the classification of the borrower or loan portfolio.

CATEGORIES

- Normal
- With potential problems
- Poor
- Uncertain
- Loss

? NORMAL CATEGORY

The cash flow analysis shows that the debtor is able to comfortably meet all its financial commitments, that is:
- Presents a liquid financial position with low debt and adequate structure of the same in relation to its ability to generate profits.
- Meets periodically with the payment of its obligations.

? CATEGORY WITH POTENTIAL PROBLEMS

The analysis of the debtor’s cash flow shows that, when implemented, can meet all their financial commitments. However, there are situations that are not controlled or promptly corrected, could compromise the future ability of the debtor’s payment, ie occasional failures has reduced payments over 30 days.

? POOR CATEGORY

The cash flow analysis demonstrates that the debtor has to address problems typically all their financial commitments and, if not corrected, these problems can result in a loss to the company’s financial system is weak in poor financial and a level of cash flows that will not let you meet the payment of the entire principal and interest on debts, and can cover only the latter.
Failure presents more than 60 days.

? CATEGORY DOUBTFUL

The cash flow analysis of the debtor shows that it is highly unlikely to meet all its financial commitments.
Failure presents more than 90 days

? LOSS CATEGORY

The debts of debtors incorporated into this category are considered uncollectible.
Failure presents more than 120 days

8. PROVISION ON LOAN PORTFOLIO

Specific
These provisions shall constitute the outcome of the classification of the loan portfolio, according to the criteria for each type of credit.

The calculation of the amount of provisions should be made based on the total amount of credit outstanding, including principal and interest.

In the event that the loan is reclassified to a lower risk category, the financial institution may reverse the excess of the provision set up, using these resources primarily on the formation of other specific provisions. If not for that amount will be given the accounting treatment of other income.

Generic
If duly incorporated specific provisions and the entity deemed to be incidental or circumstantial facts could result in a detriment to the quality of its loan portfolio may be well-founded general provisions.
Applicable accounting accounts are:

Commercial loans 1409.01
Loans to micro 1409.02
Consumer loans 1409.03
Mortgages 1409.04

PENALTIES FOR BAD CREDIT

The board may proceed to the punishment of a loan classified as “Credit Loss” after exhausting all possibilities of their collection and further when there is real and verifiable evidence of irrecoverable or in other cases, when the credit amount does not justify initiating action court and has more than twelve months after the expiration of this credit, without having produced any repayment of principal and interest. This period is six (6) months, in the case of consumer loans.

The institution shall establish within their internal control policies, procedures and measures necessary to carry out the punishment of bad debts was evident in the respective acts of directors or equivalent body, the lines of the same, registering such loans accounted for 8103 in Bad Debt account punished.

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