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CREDITWORTHINESS MONITORING
Abstract
The monitoring of creditworthiness consists in supervising, monitoring and controlling the borrower's financial and business activities in order to establish its ability to timely and accurately fulfill the obligations on obtained loans. It also includes assessment and forecasts in the creditworthiness evolution under the influence of internal and external impact factors. The most important preconditions and requirements for creditworthiness evaluation are: ?The granted credits, as an absolute value, to match the borrower's actual needs; ?The credit duration to correspond as accurately as possible to the turnover of thefunds, for financing of which it is granted; ?The profitability of the borrower's business to fully cover the value of the credit,the interest, the fees and the forecasted credit risks. Verification of creditworthiness as the most important point of monitoring is performed in the cases of: ? Establishment of credit relations; ? On special occasions – for example, in raising of the credit amount or in its rescheduling; ? Difficulties in utilization and repayment of the credit. The report identifies and considers two sets of prerequisites for presence of creditworthiness: personal and material. The qualities of the management constitute important consideration in the personal prerequisites: education, qualification and professional experience of the managers. The material prerequisites are determined by the credit portfolio data about the borrower's financial and business status. Based on the conditions and prerequisites for creditworthiness, the report examines the main factors that define and characterize it as the borrower's capability, its reputation, its ability to earn income, the value and the quality of the possessed assets, the amount of the equity, the cash flows, the market positions, the rate of return, the liquidity and solvency ratios.
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