Alejo Lopez Casao
Empresologo | Credit and Operations Director
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Empresologia

General Ideas on
Economy, Business and Life...

my other blog

Getting prompt credit decisions

3/11/2018

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When you are working as credit analyst, you have to learn  to say no from time to time and say yes some other times, and always to decide and convince with limited information. 

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Diez reglas para el negociador

6/2/2018

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Rentas percibidas por los administradores

6/2/2018

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Rentas percibidas por los administradores
últimos cambios adoptados por Hacienda, respecto a la calificación de la rentas de los administradores de sociedades mercantiles​

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Approach to credit analysis -INTRO

14/5/2017

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Looking Up Data In Tables

4/3/2017

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As you become more proficient in Excel, you will that a very common task is looking up values in tables. For example, you may have a table of part numbers and unit prices.  A simple lookup function, such as VLOOKUP or HLOOKUP can return the unit price for a specific part number.  These functions are well documented in the on-line help files, and won't be discussed here.
This page will describe more advanced techniques of looking up data, especially looking up data by two key values, instead of one.  We'll begin with the following example....


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Checklist for Conducting a Perfect Meeting

18/12/2016

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Article: Spreadsheets have ruled Earth for too longbusiness must embrace the cloud

5/11/2016

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Financiacion Proveedores

22/10/2016

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Doctor NO

31/8/2016

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While I was working in General Electric as credit manager,  some friends used to call me Dr. No.
Nothing to do with the infamous villain from Bond movies, but they said (and was not far from reality) that my only work was to say No from time to time to the credit operations that showed up in my table.

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Risk Assesment & CAMPARI

1/8/2016

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Risk Assesment & CAMPARI

Summer time..., moment to relax, enjoying the views from a sunny terrace and sipping a refreshing drink... yes, is time for C.A.M.P.A.R.I. These letters summarize what you have to remember next time you are lending to somebody, anybody...

Character

Who are you lending to? What is their history? Are they good at what they do? Are there areas of weakness? By asking detailed questions of the borrower one can establish if they are of good character. Bad character traits would be a poor credit history, no experience in the sector in which they are operating, not being qualified for the job they are doing, and so on.

Ability

Can the borrower afford to repay or refinance the loan over the period they are asking to borrow for? For this one can look at bank accounts, the business financial accounts, forecasts and projections. Questions such as “who produced the information?” are also valid, as a business plan written by a reputable firm of accountants carries more credence than one that isn’t. This also includes the ability of the owners and their capacity to run the business properly.

Margin / Means

First Margin. Very simply, how much interest income do you want to make? For lower risk, such as a 60% mortgage, the margins will be small as the risk is lower due to the level of equity in the property being funded. For higher risk, the margins are higher to compensate for the greater risk of loss. Secondly Means, or the proper resources and operations to run the business that can safely create enough returns to comfortably pay the interest.

Purpose

What is the loan for and does this fit with the nature of the borrower? For example, a fish and chip shop wanting to borrow money to buy a new deep fryer would be an acceptable purpose. The same shop wanting to buy a knitting machine wouldn’t.

Amount

Size really does matter. The more money someone borrows, the higher the risk. The amount also has to be compared against the apparent value or wealth of the borrower. Banks are happy to lend several million pounds to large companies, as the borrowers have the assets to support the loan. The average man in the street won’t get a loan of this size because he hasn’t got the assets or the ability to repay.

Repayment

How will your loan get repaid? Getting some of your capital back each month reduces your risk of loss. Full repayment over 3 years is less risky than full repayment over 25 years, as there is less time for things to go wrong and the borrower default. If the borrower does default, how do you get your money back?

Insurance

Also known as security. If the borrower stops making repayments, what assets can be used to repay the loan in full? Each type of security has its own risks and these should be considered before making a loan.

Once you are back to work, remember the CAMPARI approach before taking your next credit decission.. 




Tags: published
July 04, 2016 at 11:39AM
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