Obtaining a Term Loan

Term Loan Procedure  The procedure associated with a term loan involves the following principal step.

The borrower submits an application form which seeks comprehensive information about the application form covers the following aspects: (i) promoters background (ii) particular the industrial concern, (iii) particulars of the project (capacity, process, technical arrangements, management, location, land and buildings, plant and machinery, raw materials, effluents, labor, housing, and schedule of implementation), (iv) cost of project, (v). means of financing (vi) marketing and setting arrangements, (vii) profitability and cash now, (viii) economic considerations and (ix) Government consents.

When the application is received, an officer of the financial institution reviews it to ascertain whether it is complete for processing. If it is incomplete the borrower is asked to provide the required additional information. When the application is considered complete. The financial prepares a Flash Report which is essentially of the loan application. On the basis of the Flash Report, it is decided whether the project life a detailed appraisal or not.

The detailed appraisal of the project covers the marketing. technical, financial, manage a economic aspects (discussed in detail later). The appraisal memorandum is normally within two months after site inspection. Based on that, a decision is taken whether the project will be accepted or not.

The term loans are secured through the first mortgage, by way of deposit of title immovable properties and hyphenation of movable properties. As the creation of particularly in the case of land, tends to be a time consuming process, the institutions interim disbursements against alternate security in the form of guarantees by the promote mortgage, however, has to be created within a year from the date of the first disbursement otherwise, the borrower has to pay an additional charge of 1 per cent interest.

Monitoring of the project is done at the implementation stage as well as the operational During the implementation stage, the project is monitored through: (i) regular reports, furniture the promoters, which provide information about placement of orders, construction of procurement of plant. installation of plant and machinery, trial production, and so on, (ii) site visits, (iii) discussion with promoters, bankers, suppliers, creditors, and other connect the project, (iv) progress reports submitted by the nominee directors, and (v) audited accounts the company.

During the operational stage the project is monitored with the help of (i) quarterly report on the project, (ii) site inspection (iii) reports of nominee directors, and (iv) com performance with promise.

The most important aspect of monitoring of course, is the recovery of dues represent interest and principal repayment.

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