1 page each total of 2 pages Topic 1: Discuss the credit process with companies looking to borrow money. What credit application criteria do you think banks give the most consideration? How hard is it...

Part 1
Credit Process:
The companies which looks forward to borrow money needs to have good credit history and
strong financial leverage. The company who needs to borrow money, first needs to analyze the
amount of money that needs to be borrowed along with the lender or the bank from which the
company is likely to get the loan or borrow money. After analyzing the requirement and the
lender, the company needs to submit the application for approval of the loan. Along with the
application the company will need to submit their past financial reports and credit history. The
lender usually analyzes the financials of the company with a strong focus on different aspects
particularly on the company’s assets, liabilities and owner’s equity. The lender also looks at the
gearing and solvency ratio of the company so as to analyze its leverage and financial strength
to pay off the loan.
Gearing Ratio is a general terminology used for explaining a financial ratio that makes
comparison between the owner’s capital and borrowed funds. The appropriate or acceptable
level for any gearing ratio is determined by making comparison with the ratios of companies in
the same industry. Ratio show the percentage of debt a company is maintaining in its capital
structure. This provides the company with an idea about the leverage of the company along
with the potential risks faced by the company in relation to debt-load. Debt Ratio greater than
100% indicates that the company is having more debt in comparison to assets while a debt ratio
of lower than 100% shows that company is having more assets than debt.
The lender analyses...