Rules for giving LOANS

RULES YOU MUST OBEY IN GIVING LOANS. FOR BANKS AND MICRO –FINANCE BANKS,INSTITUTIONS

These rules are derived after some years of experiences in Banking Sector of the Economy.

Advice from financial expert

1.    Never give loan to friends, relatives and love ones

2.    Never give loan without getting a post dated cheque or valid properties certificate more the value of the amount given as loan to a client.

3.    Verify if the issued cheque account is still maintained by the clients, before giving. To avoid client giving you cheque whose account is dormant.

4.    Never give out of pity, less you are to pay back all

5.    Never be close or simple during recovery of unpaid loan balance.

6.    Make friends earlier with security agent they can be very help in loan recovery process especially in developing countries.

7.    If the loan client is married inform the husband or wife and children before giving out the loan this will instill fear in the client and will enhance smooth payback based on repayment arrangement.

8.    Visit your client business place regularly, to ensure that your client is still in business and expanding or do not change place to an unknown business address.

9.    For long time faithful client (s) reduce the amount of money given out to them as loan after many loan cycles.

10. Do better enquiry about your client behavior toward finance, savings and spending habits, I want to help to succeed.

11.  Never accept significant money and non monetary gift from your client as this will tamper with your integrity, and professional judgment.

12.  Use ownership approach in giving out loans, knowing that if it is your direct fund, money you will allow one naira or dollar to loss.

13. Pay great attention to all clients who fail to do their repayment as scheduled , put more pressure on them and the loan is closed may be through adjustment using savings and initial deposits.

14. Appraise your performance monthly to compare your inflow in terms of profit for the month with salary and other unavoidable expenses.

15. It have been agreed and mentioned in many publication of international recognized journal and it become an acceptable saying that business that survive for at least five years from date of setup will not windup, this saying is an assumption. I have studied and see business (es) that still fold after seven years from setup date, due to lack of separation of ownership from management.

Lack of knowledge of financial and business management skills, excess withdrawal of fund  above the Net profit of the company for personal, non business related expenses.

16. Use guarantor that are working or have big business that is successful over time. Keep that guarantor information about progress/failure in repayment process.

17. Coach, advice, encourage your clients to , make their repayment on or before the due date,pray for their business expansion. Teach them to diversify their business and sources of income.

18. Discourage them from collecting loan from many financial institutions at once.

19. Know your clients, very important.

20. Make friends with other financial institution workers, then you can have better information about any suspected client financial dealings with other financial institution. Take wisdom.

21. Learn financial analysis skill, this help you calculate payback, know bad debt and follow strictly for early recovery of write off.

22. Each loan issued should have many security, loan recovery strategy, use of responsible guarantor as aforementioned above cannot be over emphasis, constantly follow up clients till the end of the loan cycle.

GOING CONCERN CONCEPT IN ACCOUNTING

Going concern concept means the ability of a Business to ‘run profitable’ for an indefinite period of time until the concern is stopped due to bankruptcy and its assets were liquidation. When a business stops trading and deviates from its going concern principle business, then there is the high possibility that the concern would likely to stop delivering profits in near-term future. Thus, a Business cannot bear losses for a longer time and erode shareholders wealth. A healthy business shows Revenue growth, Profitability growth with margins improvement and growth in product sales.

Going Concern Concept – Conclusion

The prime aspect for a Business remains the capability and integrity of the Management. Proper Business foresight and Operational efficiency are required for a business to sustain and remain profitable for a longer term. The Cycle of the business during economic recessions is crucial which determines the ability of the Management when major firms fail to generate profits.

I will write you again about other necessary financial information as time flies.