Workshop Coverage:

Retail/Consumer Loans

THE CONSUMER CREDIT BUSINESS

Lesson 1 – Consumer Lending Definitions and Objectives outlines basic descriptions of consumer credit and its role within the bank, with the bank’s customers, and within the community.

Lesson 2 – Consumer Lending: Client Borrowing Needs and Consumer Loan Types, provides tools and techniques for identifying borrowing needs and helping their clients find the right financing for their situations.

Lesson 3 – Consumer Loan Application Considerations discusses borrower interview needs to obtain complete and accurate information.

THE APPLICATION PROCESS

Lesson 4 – Income Sources and Borrower Stability reviews techniques for assessing an applicant’s stability with respect to residence and employment are also explored.

Lesson 5 – Borrower Assets, Liabilities, and Net Worth focuses on the personal financial statement and how it is used in assessing the net worth of an individual who is requesting a consumer loan.

Lesson 6 – Pre-Investigation Decline Decisions discusses situations where a loan application is declined before a thorough investigation of the applicant’s information is carried out.

CREDIT VERIFICATION AND INVESTIGATION

Lesson 7 – Verifying Customer Information focuses on time- tested techniques to uncover misleading or fraudulent financial or creditworthiness information submitted with a loan application.

Lesson 8 – Security defines the types of security the bank may choose to attach to different consumer loan types.

Lesson 9 – Documentation and Related Processes summarizes the required bank forms and protocols that are part of the different phases of the consumer lending process.

THE CONSUMER CREDIT DECISION PROCESS

Lesson 10 – The Total Debt Service Ratio helps learners gauge if the potential borrower has taken on too much debt and if the borrower can be expected to cover payments arising from a new loan without undue stress.

Lesson 11 – Analyzing and Interpreting Key Data looks beyond the Total Debt Service Ratio (TDSR) and introduces other types of information into the consumer credit decision process.

Lesson 12 – Completing the Decision Process re-visits the formal decision process to evaluate all informational and analytical components and come to a reasoned credit decision.

CREDIT RISK MITIGATION

Lesson 13 – Handling Non-Conforming Credit Decisions makes the case for a process when going outside policy or making a counter-offer in a loan scenario that may actually be plausible even though not tightly conforming to standard practice.

Lesson 14 – The Credit Decision Process: Lessons Learned presents examples wherein different requirements in the lending decision process were not followed and illustrates the consequences of these situation

CONSUMER LENDING SALES PROCESS

Lesson 15 – The Sales Model, Identifying Targets, Understanding Needs, Building Trust Relationships, Customizing Solutions, Overcoming Objections, asking for the Business, Closing the Sale

SERVING CONSUMER LOAN BORROWERS

Lesson 16 – Communicating Complex Information, Handling Irate Customers, Addressing Bank Mistakes, Barriers to Communication, Handling Distraught and Grieving Customers, Handling Inappropriate Customers, Escalating Branch Issues

SME Loans

CREDIT MANAGEMENT

Lesson 17 – Describe the overview of Credit Management, Appropriate pricing as per risk, Risk Adjusted Pricing

INTRODUCTION TO ACCRUAL ACCOUNTING

Lesson 18 – Describe the information provided by the balance sheet and profit and loss account, Identify the connecting links between the two statements, Prepare and manipulate simple financial statements that reflect the business activities of a small company, Apply the correct criteria to determine the point at which sales and expenses should be recognized on the profit and loss account, Connecting the Statements, The Accounting Process, Journal Entries

THE ASSET CONVERSION CYCLE

Lesson 19 – Describe the terms Operating Cycle and Capital Investment Cycle, identify business activities as part of one of the cycles, explain the terms holding period, payment period, and collection period, and explain how changes in these periods can affect cash flow, Estimating Operating Cycle Financing Needs

ACCOUNTING FOR THE OPERATING CYCLE

Lesson 20 – Distinguish between appropriate and inappropriate applications of GAAP and better judge the quality of financial statement information, Identify and quantify sources and uses of cash to analyze the total cash flow of a business, determine whether a company is using standard methods of recognizing revenue and expenses, including bad debts, determine whether a company is using a standard method of recognizing cost of goods sold, and assess the effect of the method on reported income and cash flow, Interpret notes to the accounts that concern stock, Recognize the effects of inflation on reported income and the effects of a declining stock on profits, Stock and Cost of Goods Sold, Job aids.

ACCOUNTING FOR THE INVESTMENT CYCLE

Lesson 21 – Recognize situations in which cash outflows are capitalized inappropriately or fixed assets are depreciated inappropriately, Predict the effects of various depreciation methods on reported net income, Assess the effects of differences between Inland Revenue rules and accountant’s rules on reported net income and internally generated cash, Differentiate between the market value of an asset and its stated book value, calculate the effects of a sale of fixed assets on cash flow, Interpret notes to the accounts on fixed assets and depreciation, Determine whether a company has properly classified an investment, Calculate the amount of the source or use of funds represented by the “intangible assets” and “other assets” in balance sheet accounts.

ACCOUNTING FOR LIABILITIES AND EQUITIES

Lesson 22 – Recognize the normal content and quality of information about liabilities presented in financial statements, distinguish between the different types of current and long-term liabilities, describe the banker’s perspective in analyzing owner’s equity and understand the key questions to be answered in the analysis, recognize the different balance sheet presentations of owner’s equity and the cash flow implications of share dividends, certain share transactions, and share options, assess working capital adequacy and analyze changes in working capital, describe the effects of tax credits and tax rules on tax liability, Interpret a note to the accounts on tax and determine current and deferred liability.

FINANCIAL REPORTING AND FULL DISCLOSURE

Lesson 23 – Describe the influence of accounting organizations and government agencies on the presentation of financial information, Describe the scope of an accountant’s role in compiling, reviewing and auditing financial statements, recognize the different assurances of accuracy and fairness given in auditor’s reports, and the extent of the accountant’s liability, recognize the importance of full disclosure, Use of Notes to Accounts to find valuable information on a company’s financial information.

IDENTIFYING BORROWING CAUSES

Lesson 24 – Use financial statements to diagnose probable borrowing needs, determine, based on the probable borrowing causes, whether loans should be short-or long term, and identify the probable repayment source. Borrowing Caused by slowdown in the Operating Cycle, Borrowing Caused by purchases of Fixed Assets, Borrowing Caused by other factors

BUSINESS RISK ANALYSIS

Lesson 25 – Determine whether the business’s strategy increases or decreases the risks faced by all businesses in its industry, state what additional risks are inherent in the company’s way of doing business, state the hypotheses about the effect of the company’s strategy and practices on its financial statements, Product-Market Match, Supply and Production Analysis, Distribution and Sales, Management Analysis, Drawing Conclusion.

FINANCIAL STATEMENT ANALYSIS

Lesson 26 – To explain that do the financial statements trends show about the borrower’s management of the business.

To explain what trends will influence the ability to repay, developing Financial Statement Expectations, assessing Operations Management, Key Financial Ratios, examining the Balance Sheet for Accounting Risk

CASH FLOW ANALYSIS

Lesson 27 – To prepare and analyze a cash flow summary, calculate a quick cash flow to identify major cash inflows, outflows, and repayment capacity, analyze a company’s cash flow statement prepared in accordance with GAAP. Performing Cash Flow Analysis, Interim Cash Flow Analysis, Cash Flow Statement, Quick Cash Flow

PROJECTIONS

Lesson 28 – Develop logical hypotheses based on the assessment of possible future scenarios, calculate the cash flow effect of the hypotheses, perform a sensitivity analysis of key variables affecting ash flow and cash flow projections, projecting the Cash Flow Summary, Project a profit and loss account, cash flow summary and balance sheet for a future period, Projecting the Balance Sheet

LOAN STRUCTURE AND DOCUMENTATION

Lesson 29 – Identify the most appropriate credit facility, Determine the timing for disbursing funds and establish a repayment schedule, determine whether support is needed, such as security or guarantees, and, if so, the appropriate type, recognize how the risk characteristics of a loan should be reflected in its price. to make familiar with the purpose and contents of loan agreements, including the risk management role played by affirmative and negative covenants, Disbursement, Term, Repayment Schedule and Support, Loan Agreements and Covenants

LOAN MANAGEMENT

Lesson 30 – Manage loans effectively by focusing on risks and opportunities identified in the underwriting process and supported by loan documentation, Credit Checks, Monitoring Customer Performance, Identifying Trouble Signs, A Strategy for Problem Loans