Crawford Development co and Southeast Bank of Texas Harvard Case Solution & Analysis

Protection in advance:

Before and in the middle of the execution of the loan, the bank ought to assess any possible risk that may cause the borrower to default on its loan commitment. These risks incorporate the capability of the borrower to reimburse the loan, and the authenticity and enforceability of the surety. In view of the bank's analysis and assessment of the potential risks, it will choose whether to issue the loan and what conditions and insurance measures ought to be stipulated in the loan understanding.

Concerning loans without any insurance, i.e. specifically credit loans, when the borrower is a business enterprise or a firm, the bank will go for a borrower with respect to its credit ratings in the market or its history of relationships with the bank. At times, if the bank considers essential, the borrower will need to demonstrate its capabilities by giving its Financials to the bank before the loan is issued.

It is simpler for the bank to know the borrower's condition with respect to its performance in the market if the borrower is a single person or entrepreneur, particularly a company that is listed on the stock exchange. But if banks need to give loans to the company with no such financial history, there is no way extensively to analyze an individual's financial position in the market. Local banks resolve this issue by making their own credit record of clients as a principle for assessing an individual's financial credibility.

Scrutinizing the borrower throughout the loan agreement:

The loan will normally specify that a borrower is obliged to give a detailed report in regards to its assets, resources, business or other money related conditions after several time intervals.

The declaration regularly expresses that the credit could be declared quickly due and the borrower must reimburse the advance instantly, otherwise the sold property will be unloaded for reimbursement on specific events. These events comprise of the borrowers rehashed disappointment to satisfy its commitments of reimbursement, for this advance and in addition other credits due like criminal action for the borrower, rearranging of the borrower benefits, or any other event that the bank considers important to be incorporated in the declaration.

It will be difficult for the bank to keep track of every borrower during the term of the agreement. The borrower will sometimes default on its loan repayment obligation even before the bank becomes aware of it. The bank must then resort to a collection procedure to recover the unpaid loan.

Collection of non-performing loans:

At the point when the borrower defaults and unable to reimburse the loan, the bank can make a case against the borrower or attempt to uphold the surety. On account of an unsecured loan the bank can just understand its right of response against the borrower.

The borrower may break the loan agreement for different reasons, including lacking honesty, powerlessness, inability, demise, liquidation and insolvency. The bank may, to some degree, experience higher risk for loans made to individual borrowers than they would with corporate borrowers. It is troublesome for the bank to stay informed concerning individual borrowers as compare to the corporate once the loans are made.

Including an authorization and declaration statement in loan statements can tackle this issue. This condition may express that in the case of default, the borrower will surrender any right that he or she may have regarding the bank's retrieval of the loan and correspond that the bank has the right to approve its partners in different authorities and power to gather the defaulted or outstanding loan. Nonetheless, the enforceability of the proviso relies on upon whether the bank's approved operator can legitimately collect debt in alternate jurisdictions.

Build a board of advisors:

One of the most effortless risks alleviating way is building a board of advisor's team. This is a gathering of analysts who consent to help and encourage banks. Normally one doesn’t pay them money, yet frequently give investment opportunities to incentivize them to help you.

The basic structure of the board of advisors included industry specialists and different experts whose counsel and associations can help individuals develop the business. By making a board of advisors, it has been indicated to financial specialists that other productive individuals, frequently including industry insiders, put stock in your vision. A bank manager who is wise enough will know the importance of making an advisory board for the success of the bank.....................................

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