Credit Risk

• Credit Risk*


  refers to the possibility of non-payment of the obligation when it falls due.
• Character*


  is a quality of credit risk which makes the debtor pay or intend to pay when his debt is due.
• Character*


  is the sum total of his mental and moral qualities. It is a quality inherent in an individual, making him conscientiously concerned about his obligation.
• Credit manager


  The gathering of evidence and the appraisal of such evidence is the job of the
• Capacity*


  signifies the ability of a debtor to pay his obligation. A debtor may be willing to pay his debt, but many not have the cash with to pay when it falls due.
• Capital*


  is the financial strength of a business. To the creditor, it is the guarantee that a credit transaction entered can be redeemed.
• Capital*


  It can be determined by deducting the total liabilities from the total assets. This is the net worth of the business.
• Collateral*


  are properties of value pledge to secure a loan. They may be personal or real properties.
• Collateral*


  This includes financial and other resources such as bank deposits, inventories, receivables and other assets that the company can pledge for loans.
• Chattel mortgages*


  loans secured by movable personal properties are called
• Real Estate mortgages*


  loans secured by fixed assets are called real estate mortgages.
• Condition*


  refers to the environment in the customer's industry, economically, legally and politically in relation to growth.
• Condition*


  These are external factors over which the credit applicant has little or no control but which may have significant influence upon the appraisal of credit risk.
• Chapin and Hassnet


  according to them most business are subject to two types of movement namely "the regular recurring seasonal activity, & the regular oscillation of business as a whole.
• Business cycle*


  The second movement may be in direct contrast with the large movement
• Credit information


  It s important that the credit man should be able to gather information about his prospective debtors. Using credit information from various sources is a basic and necessary part of every good credit decision.
• Application form*


  initiates the relationships between the debtor and the creditor. It is the best source of data. Most often is ranges from single page information to as many as four to six pages.
• Personal Interview*


  The customer is the cheapest and the easiest source of credit information. A direct contact with the customer enables you to assess him personally.
• The General Mercantile Agency*


  is to provide the credit information it has assembled from all parts of its business field of operation.
• Dun and Bradstreet*


  The most frequently used general mercantile agency. It is also the oldest organization of its kind.
• Special Mercantile Agencies*


  are sometimes referred to as trade agencies. Their scope of coverage is limited to a single trade or limited to a number of allied trades
• Personal Investigations*


  is another form of gathering information for credit files. A staff of full time reporters is maintained.
• Public and Published records*


  These consist of all legal recordings such as deeds, mortgages, suits, judgements, and current news items such as clippings from newspapers and trade journals.
• Credit Bureaus*


  are associations of businessman providing information gathered from each other to other members of the organization.
• Retail credit bureau & Credit Interchange bureau


  There are two kinds of credit bureaus
• Credit Interchange Bureau*


  is the exchanging of information among local credit bureaus.
• Bank Credit Department


  one of the best sources of credit information. Banks are intimately involved in the activities of their customers.
• Information from reference


  reference indicated in the information sheets and obtained from the interview could give light on the prospective customer's credit worthiness
• regular recurring seasonal activity & regular oscillation of business as a whole


  according to Chopin and Hassnet most business are subject to two types of movement namely