Problem Loans: Warning Signals, Assessments and Recovery

Problem Loans: Warning Signals, Assessments & Recovery Objectives are:

Course Contents

Day One

Introduction - Why Companies Fail

• Business failures
• Macroeconomic instability
• Political instability
• Declining industry
• Financial stress
• Management failure.

Causes of Corporate Failure

• Weak Financial Structure
  • high gearing
  • poor liquidity
  • high operating costs/low marging
  • cash consumer - poor cash flow
• Overtrading
  • emphasis on growth and not profit
• Poor Leadership and Management
• Poor Information Management System
• Acquisition/Diversification
• Too big a project.

Day Two

   Problem Loans - When and Where to Look

• Branch Information
• Personal Information
• Financial Information
• Management Information
• External Information

Branch Information

• Excesses
• Increasing hard core in outstandings
• Returned cheques
• Overdue items
• Reduced turnover on account
• Withdrawals in large amounts.

Security

• Value of security going down
• kite-flying
• poor reporting on secured assets
• many requests for bank information

Day Three

Personal Bank Information

• Elusive head or manager
• Request to release security
• Request to release personal guarantees

Customer Personal Customer Information

• Request for increased in facility
• Supplier payment pressure
• Old stock
• Poor staff morale
• Changes in key staff/management

Financial Information

• Sudden losses
• Substantial decrease in net worth
• Substantial decrease in liquidity
• Deteriorating ratios
• Late submission of financials
• Auditors qualified opinions
• Change of auditors
• Change in valuation of assets
• Window dressing
• Drop in trade creditors
• Sale and lease-back of assets.

Day Four

Management Information

• Current performance information not available
• Current performance information cannot be prepared
• Inflated management ideas about current profitability
• Underestimated management ideas about current liability
• Sensitivity analysis poorly or not done
• Targets consistently not met
• Poor or no costing system.

External Infomation

• Troubled industry or sector
• Unfavourable market information
• Increased borrowing from other banks
• Security given to other banks/creditors
• Suspicion on information from other banks
• Ratings downgraded.

Note: Available as Classroom Training as Well as Online Training