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Lending Money Is Easy When You Know What You Are Doing

Updated on May 22, 2011

Why Lending and Borrowing Are Easy When You Know What To Look For

Why Lending and Borrowing Are Easy if You Know How

Character

What do you know about your client, what can you prove using passport, utility bills, bank statements and credit searches to show you are dealing with a flawless or flawed character?

Capital

How much is your client risking in % terms of the overall cost of the transaction you are being asked to fund. The greater the client’s % risk the better he/she will work to ensure the loan is repaid.

Capacity

How are they going to create the funds to repay their loan, how much do they earn that is not already spoken for and how willing would they be to do extra work to earn more by way of overtime if they can or another job evenings and weekends.

Purpose

Why do they want the money and what is it for and is there adequate security being taken both on assets and on the client’s life with insurance cover rolled in?

Amount

How much of the loan is secured or covered by asset value and how much is truly at risk relative to what the client is risking?

Repayment

How long does the client need to repay and are the terms short enough to ensure speedy repayment and where are the funds coming from for repayment. Are the funds earned by the client or is it from the sale of the security or other assets that repayment will be made?

Terms

Is the return to risk ratio balanced so that you are rewarded for the loan and the client is not being charged an onerous rate on the transaction. Is it spread out long enough to make it certain that both you and the client can budget safely and feel comfortable with the deal?

Security

Property, tangible assets, stocks and shares, deposit accounts, Insurance Policies in fact anything that the client is willing to put into the deal should be adequately secured and all the requisite documentation taken and lodged or registered where necessary before parting with any funds.

Alan BowmanACIB

AB05112009

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