To help companies set up an effective trading strategy, I reviewed 50 applications for long-term loans that were submitted to eight New York and regional banks. The study, which is a review of the borrower`s accounts and final credit agreements, confirms that executives are concluding the best (least restrictive) credit package: an oil pump manufacturer (Quadrant 2) wanted a multi-million dollar loan over five years to double the size of its production site and provide working capital to increase its turnover. The company faced low profit margins, inventory control issues and operational inefficiencies. However, in order to maintain market share, enlargement was necessary, although additional production and distribution capacity could exacerbate the problems. A small business loan, officially known as a 7(a) secured loan, promotes long-term financing. Short-term loans and revolving lines of credit are also available to meet a company`s immediate and cyclical working capital needs. Long-term credit terms vary depending on the repayment capacity, the purpose of the loan, and the useful life of the funded asset. The maximum term of loans is usually 25 years for real estate, seven years for working capital and ten years for most other loans. The borrower repays the credit with monthly payments of principal and interest. Floating Lots on WHL`s assets, which grant a general and variable royalty for project equipment owned by WUK and which insure WUK`s obligations under the loan (as a borrower under the Loan Agreement) and the company`s obligations as guarantors of WUK`s obligations to the lender (Scottish law). Let`s first look at the two parts of this competition. Initially, the Bank`s perspective is based on an objective and subjective analysis of the financial situation of the borrowing company.
The analysis is based on this established principle: permanent asset needs should be financed by permanent capital. When sustainable capital takes the form of long-term debt, the lender wants to know how healthy the borrower`s long-term profitability is. Therefore, the Bank first questions the financial information – the historical financial statements (usually five years), as well as a forecast of the income statement, balance sheet and sources and the use of the financial statements for each year. Insurance and guarantees are similar in all establishment agreements. They focus on the borrower`s legal capacity to enter into financing contracts and the nature of the borrower`s business. They are often broad and the borrower may try to limit them to issues that, if not correct, would have a significant negative impact. This qualification can be applied to many of the insurances and guarantees on the borrower`s activities (e.g.B. However, litigation, environment and accounting) are probably not acceptable to the lender, in order to limit the borrower`s ability to enter into financing agreements or with respect to material financial information. The banker felt that the balance sheet was quite strong. To maintain this strength, it has set a long-term debt ceiling and a minimum of current ratios. However, as the borrower`s strategy put him at a significant commercial risk, the banker wanted to trigger a quick default in case of losses. So he established a minimum asset pact that increased every year, and he closely followed the planned levels.
The banker also felt that the company`s final profitability was too uncertain to risk refinancing as a source of necessary capital payments, which limited investments, investments and dividends. The bank contained a negative deposit clause and a ban on sales of assets of more than $US 1 million per fiscal year. If a trigger is too restrictive, you may be able to prove that while future earnings might be lower than expected, it wouldn`t necessarily reflect a fundamental or lasting deterioration in the company`s profitability. . . .