The credit report is an essential part of every type of organization. So, we should know how to prepare a credit report. You will find this easy after following the table which I give below. Here also some sample credit report is provided below:
Table of Contents
How to prepare a credit report on sole proprietary or partnership concern (Proforma-1)
- Name: Full name should be mentioned which helps the identification of the party.
- Address: Full address of the place of business. It will indicate whether the place falls within the command area of the branch.
- Date of the compilation of report: State date of compilation of the report.
- Nature of the firm and date of establishment: State whether it is a proprietary or partnership concern. In the case of partnership concern whether the firm is registered, mention the names of partners and their relationship, and their individual contributions to capital. Mention the date or at least year of establishment and borrowing powers of partners.
- Nature of business: State whether they are manufacturers, importers, exporters, wholesalers, etc. In the case of importers, state the worth of import categories held. In the case of manufacturers, state if they hold any category for import of industrial raw materials.
- Investment in the business: State initial investment in the business, details of present stocks on hand, the amount of goodwill of shops, godown, office premises, etc. In the case of manufacturers, state the cost of lands, buildings, raw materials, ready stocks, working capital, and annual production. Machinery must be listed, e.g., for textile Mills, the number of spindles and looms; for Oil Mills- the number of expellers or grannies; for Hosiery Mills- the number of hosiery machinery, etc. If factories, shops, or godowns are insured, state the amount for which insured.
- Allied or subsidiary concern, if any: If the proprietor or partners are connected with other business concerns, state the nature of their interest in that firm, their shares in that firm, nature of business of that firm, and general opinion regarding them.
- A brief history regarding the proprietor/partners: State to what place the proprietor or partners belong and their engagement before starting the firm, how long the party is in the line of business, and their experience, dealings, and their capacity to manage the business and future plans. If they hold life insurance policies, details of policies, amount insured. Details of landed properties along with value owned by them or their family members, shares and securities, etc., may be enumerated but relevant documents must be verified before accepting the information.
- Sales: Details of sales for the last 3 years. It will give an idea of whether the business is prospering or declining.
- Annual income: The annual income of the party for the past 3 years to be taken from the profit and loss account and verified with income declared in an income tax return. This will serve as a good indicator of the business integrity of the borrower. In case the income is very high in proportion to the capital invested, one is led to believe that either the information supplied is incorrect or the party is trading party for windfall profit and possibly is speculatively engaged in his business. If the income is very small in proportion to the capital invested, it may mean that either the business is unprofitable or the party lacks the business capability. It would, therefore, be necessary to officer a note in the report explaining the wide disparity between income and capital invested by a party in business.
- Market reputation: State reputation in business, reputation as to meeting commitment and obligation in the past, their integrity. Whether the party is considered honest and straightforward. All the information based upon inquiry with firms dealing in the same merchandise who may be their friends/rivals should be taken after checking and cross-checking.
- Means: Report must contain full information as to customer’s financial resources, i.e., full details of investment in/from associate. When financial standing or means is estimated, the investment made by proprietary or partners is business and other personal assets of the proprietors or partners to be shown separately. Net means will be equal to capital and reserves plus properties in the name f proprietor, and partner. Intangible/fictitious assets, such as goodwill/ etc should, however, be deducted.
- Bank account and our experience: State date of account opened and nature of account maintained. Annual turnover, minimum, maximum, and average balances maintained. Details of import or export business, local bills received, bank’s income their form, and any other benefit to the bank. Whether they enjoy credit facilities; if so, state the experience regarding the operation of the credit availed.
- Names of other bankers, if any: If any are maintaining the account with other banks, state their names and capabilities given to them. In addition, a confidential report from the bankers must be obtained. A statement of Account of the previous banker should be obtained.
- Preparation and signing of Credit Report: Branch Managers are expected to have a very fair idea of the assets, means, and credit position of their borrower constituents. They may depute Credit investigators to collect credit information but Branch Managers should make independent inquiries to establish the veracity of credit checking made at their branch. A credit report should be signed jointly by the Manger and the credit Investigator.
- Revision of Credit Report: Every credit report should be revised intelligently and properly at least once in six months. It is, of course, understood that if at any time an adverse report or damaging information is received on a constituent or a major change is noticed integrated into the assets and means of a party, immediate steps should be taken to review and revise the credit lines made available to him. It is also necessary that whenever a new credit proposal or renewal of an existing credit line is recommended, the report on the party concerned is checked up and revised.
Preparation of credit reports on limited company (Proforma-2)
- Name of the Company with complete address: (As per Proforma-I)
- Date of the compilation of the report: State the date of the compilation of the report.
- Nature of the Company with the date of incorporation: State whether it is a private or a public limited company and the date it was incorporated. State whether the company has borrowing power; if so, to what extent.
- Authorized Capital, Issued, Subscribed, and Paid-up capital: This should be verified from the Balance Sheet and Stated.
- Name of Directors: State name of Directors.
- Nature of business: (As per proforma-I)
- Nature of allied concerns, subsidiary concern, if any: (As per proforma-I)
- If the Directors are connected with other concerns, state names: State name indicates an investment of the Directors in other concerns.
- Obtain a copy of the latest balance sheet available and Trial Balance up to date: The last 3 years’ Balance Sheet and Trial Balance for analysis and interpretation.
- Verification of prior charges on the properties: State whether there are any prior charges on the prosperities.
- Bank account and own experience: (As per proforma-I)
- Other bankers, if any: (As per proforma-I)
- Market reputation: (As per proforma-I)
- Preparation and signing of Credit Report: (As per proforma-I)
- Revision of Credit Report: (As per proforma-I)
Sample credit report on proprietorship concern
|Name M/S. BENGAL ELECTRIC CO.|
Address: 90, High-Level Road, Dhaka
Source of information: Ourselves
Date of compilation: 15th December 2001
Report: Sole proprietorship concern was established in June 1990 with M Rahman as proprietor. It is an importer and dealer in electrical goods and, has initially invested Tk. 5 lace in business. Mr. Rahman has experience of more than a decade in the business of electrical goods. He has well acquainted himself with the import and export business, particularly in electrical goods of the Far-Eastern countries through an extensive tour of the area and enjoys goods reputation in the market as a well-experienced businessman.
The income has been gradually increasing with the increase in sales every year. The firms have been banking with us since its very inception and maintain a satisfactorily conducted current account. Its means are reported to Tk. 25 lacs.
Sample credit report on partnership concern
|Name: RAHIM & CO.|
Address: 22, Low-Level Road, Dhaka
The source of information: Ourselves.
Date of completion: 15th December 2015 Report: Partnership concern (previously proprietorship concern of Mr. Abbdur Rahim) was established in 1985 with an investment of Taka 5 lac. The firm is registered and the partners of the form are reported to be
They share with the firm equal to the extent of Tk. 5 lac each. They are Engineers and Contractors. Dealers in Electrical Cables. Air-conditioning, Refrigeration, and spare parts. Partner Nos. 1, 3 & 4 are also Directors of Light Automobile Limited.
The partners are reported to be experienced business people and possess a reputation in the market. They are reported to be true to their commitments. They made a very good income during the past years. They maintain a satisfactorily conducted current account with us. Their means are reported to be Tk. 50 lacs.
Sample credit report on limited company
|Name M/s, XYZ Co. LIMITED.|
Address: 30, Zig Zag Avenue, Dhaka.
The source of information: Far East Bank and Ourselves.
Date of compilation: 15th December 2015
A public Limited company incorporated on 1-1-1988 in Dhaka.
Authorized Capital Taka 5 Crore.
Manufacturers of Art Silk and Synthetic Fibre Fabrics. Also Processors, Dryers, and Printers. The mill was established in 1984 with a factory area of 4 acres and a construction area of 2 acres. The mill is working with 200 power looms imported from Japan. The mill is also equipped with completed dying, processing, and printing plants. The directors come from respectable families and are reported to be big industrialists and very resourceful people. Director Nos. 1 & 2 are brothers.
Properties of Director No 1: Two-storied bungalow at Gulshan, Dhaka on a plot of 4000 sq. ft. Worth Tk. 50 lac.
Properties of Director No 2: Double-storied building at Banani, Dhaka on 2000 sq. ft. Valuing Tk. 30 lac.
Properties of Director No 3: A plot of 3000 sq. ft, at Dhanmondi, Dhaka worth Tk. 20 lac.
Properties of Director No 4: the One-storied building of 2000 sq.
Investment in other firms
Previous Bankers: People’s Bank and South Bank.Directors are reported to be respectable, straightforward, and trustworthy in their dealings and possess large means of over Taka’s two crores.
You may like also: