Sources of formation of enterprise funds are subdivided into own and borrowed. In the financial statements, they are reflected in the liabilities of the balance sheet as accounts payable of the organization and equity. Knowing the amount of borrowed capital, you can preliminarily assess the possibility of obtaining a bank loan by the company.
Instructions
Step 1
In the practice of lending to small and medium-sized businesses, many banks use 2 indicators from the balance sheet liability as the main factors affecting the final loan amount:
1) the amount of the company's equity capital;
2) the ratio of the amount of borrowed capital to own funds and the balance sheet currency.
Step 2
The amount of the company's equity capital in most cases cannot be less than the amount of the loan issued. This is the general rule of business lending: the client cannot risk less than the bank risks. However, with increased competition in the financial services sector and increased supply, banks and non-banks have begun to use a different lending scheme.
Step 3
It is no secret that commercial companies that provide exclusively services, as a rule, do not have sufficient equity capital. As a result, they cannot apply for a large loan amount. However, the profit from the business is quite sufficient to service the requested loan. In this case, banks are much more important than the ratio of borrowed capital to equity and the general financial condition of the company.
Step 4
Despite the fact that each bank uses its own methodology for assessing risks, it is still possible to single out some generally accepted norms of analysis.
• If the ratio of the borrowed capital to the balance sheet total is less than 30%, and the financial position is assessed as good, this means that the level of borrowed capital is acceptable and the company can apply for a loan.
• If the borrowed capital is equal to own funds, it is worth paying attention to the analysis of trends in the financial condition of the company. The option of increasing accounts payable due to the deterioration of the company's position in the market is possible.
• If the borrowed capital is more than 50% of the balance sheet total - this means that the company is actually doing business "on wheels". In this case, the credit assessment should include a more detailed analysis of the business and a deeper risk assessment.
