Credit Review Helps Assess Financial Condition of

Borrowers

The term credit review is self explanatory. It aims to check

whether the credit allocated to the client followed lender’s written

credit standards. It also checks its compliance with banking

regulations. If any document or signature is missing, it can be

immediately corrected by the lending officer so that there is no

possibility of any loss or degradation in credit quality.

Reasons of credit analysis

According to Investopedia, financial institutions periodically check

the credit extensions to verify that the extension was in accordance

with the rules. It also scrutinizes whether the borrower is steady and

sound enough to deserve the extension period. In fact, credit

reviews are considered to be the first step taken my credit repair

agencies to thoroughly examine what steps they would need to take

in order to help someone bail out from the financial crisis.

Credit review techniques

The major techniques to carry out analysis of the credit include ratio

and trend analysis, projections creations, thorough analysis of cash

flows. There are other factors that too are taken into consideration

of this analysis. They are collateral and other sources of repayment,

credit history and management ability. The analysis is done to

predict if a borrower may default on its debts as well as the impact

of losses in case of default. Credit analysis by financial market

participants reflect credit spreads. Credit spreads are the difference

in interest rates between theoretically “risk-free” investments.

Things considered for approving loans

Along with the above discussed factors, another factor to be

considered by financial institutions for granting the credit is the

cash flow of the borrower. The debt service coverage ratio is very

crucial parameter to examine the repayment ability. Typical

commercial bankers look for 120 percent as debt service coverage.

To say it in simpler words, debt service coverage ratio needs to be

1.2 or higher to make sure that there is an extra support system

and a business can manage its debt needs.

Benefits of credit analysis

One of the most important benefits of getting the credit analysis

done is preparing to be in control of your finances. It educates a

borrower about the present situation of her credit and helps find a

way to manage it. The professionals conducting this analysis offer a

solution that works and bail the customer out of their debt troubles.

The help of these professionals also eliminates the need to remain

present in the negotiations for the borrower saving time, energy

and money. So, if you are a borrower facing some financial crunch,

to get the credit review done would be the best solution to your

troubles.

Find more information at http://www.ceisreview.com/ or call us on

888-967-7380