The mechanism of crediting and its elements. Features of the economic mechanism of lending

In the process of lending, modern banks use a number of organizational and economic methods of providing and repaying loans. The totality of these techniques as private actions to organize the credit process, its regulation in accordance with the principles of lending, is called the mechanism of lending.

As constituent elements, the lending mechanism includes:

• 1. Analysis of the creditworthiness of the borrower.
• 2. Organizational and economic methods of issuing and repaying loans (elements of lending).
• 3. Methods of lending.
• 4. Preparation and conclusion of a loan agreement.
• 5. Implementation of bank control over the execution of the loan agreement (credit monitoring).

Let's take a closer look at each of the elements of the lending mechanism:

1. When analyzing the creditworthiness of the borrower, it is important to pay attention to the order and degree of participation of the borrower's own funds in the credited operation, while the amount of own funds in the economic turnover of the enterprise affects the amount of the loan to be issued indirectly, namely through the establishment of a whole range of indicators of the client's class when determining his creditworthiness.

The creditworthiness of the client is the ability of the borrower to fully and on time pay off its debt obligations, including the principal debt and interest payments.

Close in meaning is the term "client's solvency". It characterizes the presence or absence of non-payments on a certain date, therefore solvency is a less capacious term than creditworthiness, one of the factors characterizing the client's creditworthiness.

Determining the level of creditworthiness (degree of creditworthiness) is the process of determining the individual or private credit risk for the bank, i.e. risk associated with a specific client, a specific loan issued to a client.

The ratio of the value of assets and the amount of debt obligations is of fundamental importance if the borrower is declared bankrupt, in a normal situation, as well as in case of insufficient cash flow from the client, the quality and size of secondary sources of debt repayment are more important.

All this forms the basis for determining the external risks of a credited operation and is taken into account when choosing a lending strategy by the bank. We must not forget about changing the criteria for assessing external risks depending on the development of the situation in the banking area: external conditions are deteriorating - banking criteria should become more stringent. It is impossible to draw up a formalized system for assessing external risks, and the intuition of bank employees, their past experience, analysis and work with statistics should work here.

Control here means the existence of a legislative basis for the client’s activities, the existence of regulatory frameworks for the implementation of credited activities by the client, taking into account the impact of changes in tax policy on the credited activity, the compliance of the credited activity with the standards and rules governing the lending activities of a commercial bank.

Based on these criteria, there are certain ways to determine creditworthiness (in practice, it is more expedient to use several methods in the analysis at the same time).

If we build a sequence of work in assessing creditworthiness, then we can propose the following procedure for conducting an analysis:

• 1) assessment of the business risk of the credited event;
• 2) assessment of the borrower's management;
• 3) assessment of the financial stability of the client (for example, based on a system of coefficients);
• 4) analysis of the borrower's cash flow;
• 5) collecting information about the client, obtaining a psychological portrait of the borrower, using for this a personal interview with him and other available information;
• 6) drawing up an opinion on the work of the client by visiting the enterprise-borrower.

One can cite as an example a questionnaire developed in a Russian bank, the completion of which allows one to form an initial opinion about the borrower and draw up a more or less complete picture of a potential borrower.

The assessment of the borrower's creditworthiness can be reduced to a single indicator - the borrower's rating. The rating is determined in points. The sum of points is calculated by multiplying the class (1,2,3) of any coefficient and its share, respectively, as a percentage.

With enterprises of each class of creditworthiness, banks build their credit relations in different ways. Thus, commercial banks can open a credit line to first-class borrowers in terms of creditworthiness, lend on a checking account, issue blank (unsecured) loans on a one-time basis with the establishment in all cases of a lower interest rate than for all other borrowers. Lending to second-class borrowers is carried out by banks in the usual manner, that is, in the presence of appropriate forms of security obligations. The interest rate accordingly depends on the type of security.

Providing loans to third-class customers is associated with a serious risk for the bank. In most cases, banks try not to issue loans to such customers.

2. Consider the content of the organizational and economic methods of issuing loans and repaying debts in courts.

The main thing is to determine the method, type of lending, i.e. a mechanism for implementing the principles of lending related to the participants in a particular transaction being credited or the characteristics of individual elements of lending used in a given bank.

Let us dwell separately on the specifics of this type of lending, such as the provision of a credit line. The use of credit lines requires particularly close work with the borrower, as means that the borrower can at any time get a loan from the bank, and the bank must hold a resource for this client. The practice of working on credit lines requires the bank to take a special commission from the borrower (for example, for opening a credit line), because. if the borrower does not fully use the limit of funds on the credit line, this means lost profits and direct losses from the bank from improperly allocated funds raised for this borrower. There are the following types of credit lines:

• -seasonal;
• -renewable, i.e. the client used the credit line, then repaid all the debt and only then has the right to use it again;
• - a credit line with a notification to the client about the upper limit of lending, exceeding this limit is either unacceptable, or increased interest is charged for exceeding;
• -confirmed: this means that each time the client agrees on the terms of a specific amount within the credit line.

Loan terms. In our banking practice (although each bank may have a different classification by terms), the following classification is used:

poste restante;

short-term (up to 3 months);

medium-term (3 months - 6 months);

long-term (over 6 months).

investment directions.

loans for current needs;

investment.

For economic purposes.

loans for the formation of reserves;

loans to finance production costs;

settlement;

factoring;

accounting of bills;

for shipped goods;

blank;

consumer;

project financing;

loans to increase funds.

The degree of enlargement of the lending object.

loans for single objects;

loans for aggregate needs;

loans for enlarged objects;

Type of interest rate.

loans with a fixed interest rate;

floating rate loans;

Repayment method.

loans repaid in one amount at the end of the term (the riskiest loan);

loans repaid in equal installments over the term;

loans repaid by proceeds credited to a special loan account.

3. Methods of lending.

Lending methods are methods of issuing and repaying a loan in accordance with the principles of lending, which determine the nature of the connection between the movement of credit and the process of circulation of funds and the borrower.

In the pre-reform period, domestic banking practice developed two methods of lending:

• - for the balance of inventory and production costs;
• - by turnover.

Differences in 2 forms of providing credit resources: in pre-reform banking practice (in terms of turnover; in terms of the balance of inventories and production costs) consisted in changing the methods and techniques for assessing the needs of enterprises for loans, the mechanism and design. This differentiation of lending methods on the basis of more technical than economic characteristics meant that lending was oriented towards a single administrative approach, the use of which led to the fact that the provision of credit resources to various enterprises occurred regardless of the needs of society in the results of their activities. As a result, the increase in credit investments significantly outstripped the increase in the real mass of commodities, without stimulating the process of meeting the needs of society in goods and services, taking into account their constantly changing structure.

Lending by balance: the movement of a loan (ie, its issuance and repayment) is carried out in accordance with the change in the value of the loaned object. The loan is linked to the movement of the balance of credited assets, which could be various inventory items (raw materials, basic and auxiliary materials, spare parts, goods, etc.), work in progress, deferred expenses, finished products, shipped goods. The growth of excess reserves caused the need for a loan, and their reduction required its repayment in the corresponding part.

Lending by turnover: the movement of credit was determined by the turnover of material assets, i.e. their receipt and expenditure, the beginning and end of the circulation of funds. Here, the loan is of a payment nature, because. the issuance of loans was made directly to the production of payment and, most importantly, at the time of the need for borrowed funds.

Lending for an aggregate object: a transitional method of lending from granting loans to numerous and disparate objects of lending to lending to an enlarged object according to a single unified scheme, and only in terms of turnover. At the same time, lending by turnover took the form of lending by the totality of inventories and production costs (within a predetermined target value), to which almost all sectors of the economy were transferred (with some features for each).

4. A loan agreement is the main legal document that regulates credit relations between an enterprise and a bank, protects the economic interests of the parties and determines their rights, obligations, and the degree of liability for violation of its main conditions.

The conclusion of loan agreements takes place in several stages.

• 1. Formation of the content of the loan agreement by the client-borrower (type of loan, amount, term, security, etc.).
• 2. Consideration by the bank of the draft loan agreement submitted by the client and drawing up an opinion on the possibility of granting a loan in general and on the conditions for its provision in particular (if the issue is resolved positively). At this stage, banks determine:
  • a) the creditworthiness of potential borrowers, i.е. their ability to repay the loan in a timely manner. A credit check is a prerequisite for concluding a loan agreement. In the process of this work, the bank realizes the right granted to it by market conditions of management to choose the subject of a credit transaction, in accordance with its economic interests;
  • b) their ability to provide credit to economic agencies in the amounts they require based on the available credit resources, the possibility of increasing them through their deposit and interest policies, attracting interbank loans, refinancing at the Central Bank, etc.
• 3. Joint adjustment of the loan agreement by the client and the bank until a mutually acceptable option is reached and submitted for consideration by lawyers.
• 4. Signing of the loan agreement by both parties, i.e. giving it the force of a legal document.

The signing of the loan agreement is followed by the provision of a loan to the economic agency on time and in the amount stipulated in the agreement, and then the subsequent control of the bank over compliance with the terms of the loan agreement, but mainly over the timely return of the loan.

5. Credit monitoring. Monitoring the progress of loan repayment and payment of interest on it is an important step in the entire lending process. It consists in periodically reviewing the borrower's credit file, reviewing the bank's loan portfolio, assessing the status of loans and conducting audits.

The credit archive is the base of credit monitoring. All the necessary documentation is concentrated there - financial reports, correspondence, analytical reviews of creditworthiness, collateral documents, etc. Each bank has its own credit file management system.

As already mentioned, the loan portfolio is the main source of income for the bank and at the same time - the main source of risk in the placement of assets. The stability of the bank, its reputation, and its financial success largely depend on the structure and quality of the bank's portfolio. Therefore, all banks monitor the quality of loans in the portfolio, conduct an independent examination and identify cases of deviation from the accepted standards and objectives of the bank's credit policy.

Thus, only the cumulative use of the elements of the lending mechanism gives confidence in the formation of a high-quality and appropriate given profitability of the bank's loan portfolio, as well as providing reliable ways to repay the amount of the principal debt and make a profit for a credit institution from the main type of banking operations in modern Russian financial practice.

The lending mechanism offers a specific method of granting a loan, the choice of which depends on the characteristics of the production and commercial cycle of the borrower, the uniformity of receipts from sales, credit history, as well as the nature of the borrower's need for borrowed funds (temporary or permanent). Thus, trading enterprises traditionally use a significant share of borrowed funds in their turnover; the speed of capital turnover and the uniformity of the flow of trading proceeds allow them to borrow funds without disturbing their liquidity.

In accordance with the Regulation of the Bank of Russia “On the procedure for the provision (placement) of funds by credit institutions and their return (repayment)”, a loan is provided to legal entities only in a non-cash manner by crediting funds to the settlement (current) account of the borrower, including when providing a loan to payment of payment documents. Loans in foreign currency are issued to both legal entities and individuals only in non-cash form.

Loan options:

• * opening a credit line, ie. conclusion of an agreement (agreement) on the maximum loan amount that the borrower can use within a specified period and subject to certain conditions of the agreement. The opening of a credit line should also be understood as the conclusion of an agreement to provide funds on any terms other than the terms of a one-time loan agreement. Within the limit of the credit line, the borrower is granted a loan by paying payment documents as needed or in separate tranches. Repayment of a loan within the framework of a credit line can occur both within a certain time frame based on the client's urgent obligations, and as soon as funds are received on the borrower's account;
• * lending by the bank to a settlement (current, correspondent) account of a bank client in case of insufficient or no funds on it and payment of settlement documents received in the name of the client: such a loan is called an overdrive - participation in the provision (placement) of funds to a bank client on a syndicated (consortium) basis (several banks unite to issue a large loan).

Repayment (repayment) of a loan and payment of interest on it can be made by debiting funds from the borrower's current account according to his payment order, as well as debiting funds in the order of priority based on the bank's payment request. In the latter case, when concluding a loan agreement, the borrower must document his consent to direct debiting of funds from his account to repay the loan. If there is a shortage of funds in the borrower's current account, the bank first collects interest on the loan, and then the principal debt

If the borrower fails to pay the amount due within the terms established by the agreement, its principal debt or interest payment shall be transferred to the account of overdue debt on principal or interest. For overdue loans, the bank sets an increased interest rate. Banks keep records of interest on transactions related to the placement of funds according to the following indicators:

accrued (accumulated) interest on the active operations of the bank (on operations related to the placement of funds) - due to be received from the bank's customers on the funds placed with them;

interest received on active operations of the bank - interest debited from the accounts of borrowing clients or paid in the prescribed manner by individuals to the cash desk;

overdue debt on receipt of interest - debt on interest due to be received from legal entities and individuals, but not received by the creditor bank upon the maturity of the period established by the agreement.

Receipt of interest on placed funds is carried out in cash: by legal entities - only in non-cash form. Interest on loans can be calculated according to the simple interest formula, using a fixed or floating interest rate.

When accruing interest on loans at a floating interest rate, the rate under agreements in foreign currency, the refinancing rate of the Bank of Russia, another interbank market rate plus/minus the interest established by the agreement may be used as the base rate. Interest on placed funds is accrued by the bank on the balance of the debt on the principal debt (recorded on the corresponding personal account) at the beginning of the business day. Accrued interest shall be reflected in the bank's accounting records at least once a month no later than the last working day of the reporting month. At the same time, programmatically, the daily accrual of interest in the context of each agreement on an accrual basis from the date of the last reflection of accrued interest on personal accounts should be ensured. Interest received from borrowers for granted loans is included in the bank's income.

Lending can be conditionally divided into several stages, at each of which the characteristics of the loan, the methods of its issuance and repayment are specified:

• * consideration of the loan application and interview with the client;
• * study of the creditworthiness of the client;
• * preparation and conclusion of a loan agreement, issuance of a loan;
• * formation of a reserve for possible losses on loans;
• * bank control over the fulfillment of the terms of the agreement and the repayment of the loan (loan support);
• * work of the bank with problem loans.

Consideration of the loan application and interview with the client. A client applying to the bank for a loan must submit an application-petition (loan application) in any form, which indicates:

• * the purpose of the loan, with a brief description of the enterprise and the possible economic effect as a result of using the loan;
• * amount of credit;
• * term of use;
• * prospective security;
• * acceptable interest rate for the enterprise. The bank requires that the loan application be accompanied by the required documents and financial statements that serve as a justification for the loan request and explain the reasons for applying to the bank. These documents are a necessary part of the application. Their thorough analysis is carried out at subsequent stages, after the bank representative conducts a preliminary interview with the applicant and concludes that the transaction is promising.

The package of accompanying documents submitted to the bank along with the application includes the following:

• - feasibility study of the need for a loan with calculations of planned costs and expected receipts from the sale of products (feasibility study);
• - a financial report, including a balance sheet and a profit and loss statement, annual and as of the last reporting dates, with the marks of the State Tax Inspectorate on their acceptance. The balance sheet shows the structure of assets, liabilities and capital of the company. The profit and loss statement gives detailed information about the company's income and expenses, net profit, its distribution;
• * report on the movement of cash receipts, based on a comparison of the company's balance sheets for two dates and allows you to determine the changes in various items and the movement of funds. The report gives a picture of the use of resources, the timing of the release of funds and the formation of a shortfall in cash receipts;
• * internal financial reports characterizing in more detail the financial position of the company, changes in its need for resources during the year;
• * internal management reports. Matching the balance takes a lot of time. The bank may require operational accounting data, which are contained in notes and reports prepared for the company's management. These documents relate to operations and investments, changes in sales receivables and payables, inventory levels; funding forecast; containing estimates of future income, expenses, production costs, receivables, inventory turnover, cash requirements, capital investments. There are two types of forecast: estimated balance sheet and cash budget. The first one includes a forecast version of balance accounts and a profit and loss account for the future period, the second one predicts the receipt and expenditure of cash; business plans. Many loan applications involve financing start-up businesses that do not yet have financial statements and other documentation. In this case, a detailed business plan is submitted, which should contain information about the goals of the project, methods of conducting operations, documents certifying the ownership of property, real estate, certified by a notary; obligations to ensure the timely repayment of the loan (guarantees, guarantees, insurance policies, securities); certificates, acts of tax authorities, a pension fund and other off-budget funds to assess possible fines and the state of accounting. For borrower clients who have settlement accounts in other banks, the above list must be accompanied by notarized: charter, registration certificate, memorandum of association, minutes of the meeting of founders, cards with sample signatures of account holders and a seal imprint. An application for a loan goes to the appropriate loan officer and within one or two days must be considered by him for acceptance or refusal. The procedure for terminating an application is different for regular and new customers, for customers who enjoy the trust of the bank and those who do not have it; having experience in economic activities and for new, newly starting organizations. Assigning potential borrowers to one group or another depends on the available information about the client, the bank's objective and reasonable caution in choosing a client. Issuing a loan without a preliminary check is not allowed, regardless of the importance of economic bodies, the powers of officials, interests and the expected effect (income). Since the bank operates mainly with borrowed capital, a significant part of which can be claimed by the owners in a short time, when considering an application for a loan, the bank must take into account the prospect of repaying obligations to depositors. Therefore, before issuing a loan, it is necessary to assess the risk associated with it and, first of all, the probability of repaying the loan on time. The safety of the principal amount of the debt - this is one of the main principles that must always be observed when the bank conducts credit operations. If, during the preliminary examination, the bank does not receive a satisfactory answer to key questions related to the issuance of a loan, the application should be rejected outright. In this case, it is necessary to explain to the applicant the reasons why the loan cannot be granted. Neither the presence of solid collateral, nor any other positive factors will be able to prevent a crisis situation if the loan is not fundamentally justified.

Often, experts neglect the analysis of many factors of a loan application, focusing their attention on the security of the loan. Undoubtedly, the presence of collateral or some other collateral significantly reduces the risk of a loan and simplifies the procedure for making a decision on lending, but it is wrong to limit the analysis of an application only to the presence of collateral.

However, it must be borne in mind that only a few applications for credit are irreproachable from all points of view. Professional training of managers and ordinary employees of the bank is excluded in giving a balanced assessment of the strengths and weaknesses of the proposed transaction and accepting the reasonable risk that is present to one degree or another in each specific transaction. After considering the application and before negotiating with the borrower, the responsible employee of the bank familiarizes himself in advance with the reference, legal and financial documents provided to him, confirming and characterizing:

• * legal status and eligibility, powers of governing bodies;
• * the financial situation of the client;
• * the purpose and purpose of the loan, the reality of its execution;
• * sources of repayment;
• * methods of guarantee;
• * the presence of debts to other creditors.

The interview allows the borrower to personally justify the need for a loan, and the bank employee to assess the nature and sincerity of his intentions. During the interview, you should not only find out key questions about the loan (questions about the client and his company regarding the request for a loan, about repayment of the loan, about securing a loan, about the client's connections with other banks, etc.), but also to assess the personality of the client , focusing on such qualities as decency, honesty and professional ability. If the client is not sufficiently convincing in indicating the goal and the reality of its achievement, or there are doubts about his decency in fulfilling the terms of the contract, these circumstances should be taken into account as a strong negative factor when considering a loan application.

Considering a loan application on the merits, the bank may refuse a loan for the following reasons:

• · if the goals and means of achieving it, specified in the loan application, are at odds with the basic principles of the bank's credit policy;
• if the share of the borrower-owner in the total capital of his enterprise is insignificant;
• if there is no confidence in the expediency of issuing a loan;

if there is any doubt about the persons involved in the loan transaction.

In this case, the application is filed in a separate file for applications that have not received approval. The conduct of banking business and business ethics require a polite, reasoned refusal.

If the bank decides to continue working with the client based on the results of consideration of the loan application and the preliminary interview, then the next stage begins - the stage of determining the creditworthiness of the borrower.

The lending mechanism involves a specific method of providing a loan, the choice of which depends on the characteristics of the production and commercial cycle of the borrower, the uniformity of receipts from sales, credit history, as well as the nature of the borrower's need for borrowed funds (temporary or permanent). Thus, trading enterprises traditionally use a significant share of borrowed funds in their turnover; the speed of capital turnover and the uniformity of the flow of trading proceeds allow them to borrow funds without disturbing their liquidity.

In accordance with the Regulation of the Bank of Russia “On the procedure for providing (placement) of funds to credit institutions and their return (repayment)” dated August 31, 1998 No. 54 - P, a loan is provided to legal entities only in a non-cash manner by crediting funds to the settlement (current) the borrower's account, including when providing a loan to pay for payment documents. Individuals can receive a loan both non-cash (by crediting to a bank account) and in cash (through the bank's cash desk). Loans in foreign currency are issued to both legal entities and individuals only in non-cash form.

Loan options:

ь one-time transfer of funds or one-time cash withdrawal (to an individual);

ь opening a credit line, i.е. conclusion of an agreement (agreement) on the maximum loan amount that the borrower can use within a specified period and subject to certain conditions of the agreement. The opening of a credit line should also be understood as the conclusion of an agreement to provide funds on any terms other than the terms of a one-time loan agreement. Within the limit of the credit line, the borrower is granted a loan by paying payment documents as needed or in separate tranches. Repayment of a loan within the framework of a credit line can take place both at a certain time based on the client's urgent obligations, and as funds are received on the borrower's account;

- crediting by the bank of the settlement (current, correspondent) account of the client of the bank in case of insufficiency or absence of funds on it and payment of settlement documents received in the name of the client. Such a loan is called an overdraft;

ь participation in the provision (placement) of funds to a bank client on a syndicated (consortium) basis (several banks unite to issue a large loan).

Repayment (repayment) of a loan and payment of interest on it can be made by debiting funds from the borrower's current account on his payment order, as well as debiting funds in the order of priority based on the bank's payment request. In the latter case, when concluding a loan agreement, the borrower must document his consent to the direct debiting of funds from his account to repay the loan.

If there is a shortage of funds in the borrower's current account, the bank first collects interest on the loan, and then the principal debt.

Individuals can repay loans and pay interest on them from their bank accounts on the basis of their written instructions, as well as by postal order, cash deposit at the bank's cash desk. Repayment of loans received by borrowers who are employees of the bank, and interest on these loans can be made by deductions from the amounts of wages due to them.

Repayment of credits in foreign currency is made only in non-cash form.

If the borrower fails to pay the due amount within the terms established by the agreement, its principal or interest debt is transferred to the account of overdue debt on principal or interest.

The credit market is the sphere of circulation of loan funds. The model of any credit transaction can be represented as a chain consisting of at least three agents (a savings holder, one or more financial institutions and a recipient), a chain along which credit resources move.

The credit market mechanism is an integral part of the credit mechanism of each individual bank, including the principles of lending, credit planning and credit management. With the help of a credit mechanism, the bank conducts a credit policy.

The inclusion of the main points in the provision defining the credit mechanism will allow the bank's management to identify the strengths and weaknesses of its activities, and positions in relation to competitors - to determine a common line of conduct and ensure a uniform approach to customers.

World banking practice, based on many years of experience in a changing environment and competitive rivalry of credit institutions, has developed a kind of "code of conduct" for banks, in other words, a set of rules aimed at conducting a balanced credit policy and to a large extent minimize the risk of lending operations. And although the organization of credit relations between a bank and customers depends on the size of the bank, the size of the loan portfolio, the type of loan, the qualifications of bank employees responsible for issuing loans, nevertheless, the process of lending to any bank, if possible, must be divided into several stages, each of which contributes to the quality characteristics of the loan and determines the degree of its reliability and profitability for the bank.

1. Formation of a portfolio of loan applications. A client applying to a bank for a loan must submit an application containing the initial information about the required loan, the proposed security. Based on the information received, the Bank performs a preliminary selection of the most attractive offers and creates on their basis an information portfolio of loan applications for further work.

2. Consideration of the application and negotiation with the future borrower.

The application goes to the loan officer, who, after considering it, conducts a preliminary conversation with the future borrower - directly with the head of the enterprise or his representative. This conversation is of great importance for resolving the issue of a future loan: it allows the loan inspector not only to find out many important details of the loan application, but also to draw up a psychological portrait of the borrower, to find out the professional readiness of the management of the enterprise, the realism of his assessments of the situation and prospects for the development of the enterprise.

When receiving an application for a loan, the bank must study not only various aspects of the loan transaction, but also assess the personal qualities of the borrower - the head of the company.

Assessing the personality of the client, the bank focuses on the following points: decency and honesty; professional abilities; age and state of health; the presence of a successor (in case of illness and death); material security. The bank should not provide a loan to an enterprise whose management is not trustworthy, i.e. if there are indications that the borrower will not scrupulously adhere to the terms of the loan agreement.

3. Assessment of the creditworthiness of the borrower and the risk associated with issuing a loan. After the conversation, the loan officer must decide whether to continue working with the loan application or refuse. If the client's proposal differs in some important aspects from the principles and guidelines of the bank's policy in the field of credit operations, then the application should be resolutely rejected. In this case, it is necessary to explain to the applicant the reasons why the loan cannot be granted. If, on the basis of the results of the preliminary interview, the loan officer decides to continue working with the client, then he must conduct an in-depth and thorough examination of the financial situation of the enterprise - the borrower.

4. Making a decision on the expediency of issuing a loan and the form of its provision - structuring the loan. In the case of a favorable conclusion on the creditworthiness of a potential borrower, a commercial bank decides on the possibility of issuing a loan and, focusing on the creditworthiness class, develops the terms of a loan agreement.

The form of the loan is determined depending on the category of the borrower and the features of the event being financed. For example, when financing some long-term event and with a particularly trusting attitude towards the borrower, the bank can open a credit line for him.

5. Conclusion of a loan agreement and registration of the borrower's credit file. Having made a positive decision on issuing a loan and structuring the loan, the bank negotiates with the client and develops a compromise version of the agreement that suits both parties. At the same time, the bank must take into account the degree of financial constraint of the borrower, the availability of alternative sources of credit from competing credit institutions. If the client's room for maneuver is limited, the bank may insist on stricter conditions in terms of repayment terms, collateral, loan costs, etc.

A loan agreement is a detailed document signed by the participants in a loan transaction and which contains a detailed description of all the conditions for granting a loan. At the same time, the bank must have a written decision of the board of the bank certifying the authority of officials to sign the agreement. The loan file must contain:

1. Application for a loan of the established form.

2. Articles of association, memorandum of association, decision to register an enterprise, sample signature card, tax inspection registration card.

3. The last annual (quarterly) balance with appendices 2 and 5 and the balance for the last day of the worked month with a mark.

4. Financial profit and loss plan for the coming quarter (a copy of the plan submitted to the tax office).

5. Feasibility study of the financial transaction for which a loan is requested, the expected profit from its implementation with a detailed calculation of the cost (expenses) of the transaction, linking the profit from the transaction with the results of the entire enterprise.

6. Copies of agreements, contracts, protocols of intent, payment documents confirming the reality of the transaction, the project.

7. Draft agreement on pledge with a list of property offered as a pledge, or other documents that ensure the repayment of the loan (guarantee, etc.).

8. Coordination with the KUGI, if the enterprise has a share of state ownership.

9. In case of obtaining a loan for new construction:

a) a certificate of the person who owns the right of ownership of the land plot for construction, the nature and duration of this right;

b) permission of local authorities for construction, reconstruction;

c) data on the availability of approved project documentation and the conclusion of a non-departmental expertise, including environmental.

10. Audit report for the last 2-3 years of work for enterprises with foreign investments and joint-stock companies, for the rest - in case of large loans.

11. Loan agreement with a mandatory lawyer's visa.

12. A detailed conclusion on the advisability of issuing a loan by an expert employee (head of the loan department).

13. Questionnaire of the client.

14. Urgent obligation on the date of repayment of the loan, a card with sample signatures, executed and certified in the prescribed manner, permission to open a loan account.

Under the loan agreement, the client is obliged to repay the loan received on time, pay the bank interest for using the loan, not evade bank control, and also not worsen his economic and financial condition, comply with the intended purpose of the loan received, provide and guarantee the availability of collateral under the loan agreement within the entire loan term, i.е. until the day the loan is actually repaid. For violation of the deadline for repaying the loan received, the client is obliged to pay increased interest to the bank, which should also be noted in the contract.

After completing all the procedures for drawing up and signing a loan agreement in the accounting department, in order to carry out all calculations for issuing and repaying a loan, accruing and collecting interest, the bank’s loan department transfers an urgent obligation on the loan repayment date, signed by the head, chief accountant and certified by the borrower’s seal, as well as an order on opening a loan account with reference to the number and date of the loan agreement, indicating the type of loan, its code. Based on these documents, enterprises open special and simple loan accounts. From special loan accounts, loans are provided to trade and supply and marketing organizations (for the payment of wages, for making payments to the budget, etc.). The loan is repaid by transferring funds from the sale of products to the credit of the special loan account, as well as by systematic or episodic write-off of funds from the borrower's current account. From simple loan accounts, loans are issued to other borrowers to pay for purchased inventory items and services, for temporary needs.

6. Control over the fulfillment of the terms of the contract and repayment of the loan (credit marketing). This is also a very important step in the lending process, since its ultimate goal is to ensure that the principal and interest on the loan are repaid on time. At this stage, the bank controls the regularity of receipt of interest for the use of the loan, conducts scheduled and unscheduled inspections on the ground with the preparation of an inspection report. In the course of such inspections, the compliance of the loan spending with its intended purpose, provided for in the loan agreement, is monitored. In addition, the bank checks invoices, contracts for the sale of inventory items, examines extracts from the borrower's bank and the balance sheet as of the last reporting date. If a bank discovers a bad loan that is fraught with default, it must act immediately. The best way out is to discuss matters with the borrower and develop a program to overcome the crisis situation. This option is more preferable than declaring the borrower bankrupt. Litigation of the borrower may have a negative effect if the latter proves that the actions of the bank caused him damage and brought him to bankruptcy.

If the client can be convinced that the situation can be corrected, the bank may offer to sell assets, reduce staff, reduce overhead costs, change the marketing strategy, change the company's management, etc. Banks can also (although still rarely) use more progressive methods of control over the state of affairs of the borrower in the form of joint activities with him or even equity participation in a joint-stock company.

7. Repayment of the loan with interest and closing of the credit case. This is the final stage of the credit relationship between the bank and the borrower. As a rule, 2-4 weeks before the loan maturity, the loan officer contacts the borrower and clarifies the loan repayment prospects. If the client asks for an extension, then he is obliged to send an official letter to the bank within five days, detailing the reasons for not repaying the loan on time. With a positive decision on the prolongation of the loan, an additional agreement is drawn up to the loan agreement. This document indicates the new loan repayment terms and the interest rate (if changed). When the loan is due to be repaid, the loan officer checks the fact of its repayment and the correctness of the listed interest according to the accounting documents. If necessary, the liquidation of the debt is carried out by issuing a collection order for an indisputable write-off of funds with interest due.

In the event of an overdue debt, the following procedure applies:

If the loan is transferred to the account of overdue loans, the loan officer draws up a memorandum indicating the reasons and prospects for repayment of the debt;

Within a week, the debtor is sent a letter of claim about the return of the loan, which is transferred to the management of this enterprise or sent by registered mail to the legal address of the enterprise. After a 2-month period, if the loan is not repaid, according to the current legislation, the case is referred to arbitration or to the court.

After the full repayment of the loan and the corresponding interest, the credit business is closed. On a separate sheet, the dates of issuance and repayment of the loan, calculations for the calculation of interest and the dates of their transfer are indicated (the sheet is filed in the file). Further on this sheet, a note is made "the loan was returned in full with interest, credit case No. __ is closed (closing date)". The mark is certified by the signatures of the loan officer and the chief accountant of the bank, and the head of the planning and economic department of the bank makes a mark on the transfer of the loan file to the archive, where it is stored for three years from the date of its closure.

Credit Process

	Name of the stage of the credit process
	Planning	The first stage of the organization of the credit process is the development and formation of credit policy. The credit policy also includes the determination of the interest rate and the term of the loan. The loan term is determined by the bank. Changing the loan term can be done in certain cases, if conditions allow. The loan rate is determined by the bank and is not subject to discussion with the recipient of the loan. Within the framework of the credit policy, the procedures for making a decision on a loan, the basic rules for processing a loan transaction, and legal support for a loan should also be determined.
	Providing	This is a direct credit service to clients, which consists in the analysis of credit projects, creditworthiness assessment, conclusion of a loan agreement, planning and issuance of a loan.
	Usage	The third stage of the credit process is the control over the intended use of the credit. The main goal of this stage of the credit process is to ensure regular payment of interest on the debt and repayment of the loan. Also within the framework of this stage, control over compliance with the terms of the credit transaction is carried out.
	Loan repayment	The fourth stage of the credit process is the return of the loaned value. The return of loans means the return of funds to the bank and the payment of the corresponding amount of interest.

Formally, the credit process should originate from the moment the loan is issued. However, according to the modern mechanism of lending, up to this point and after it, a significant amount of work is carried out by the creditor bank and the borrower.

Stages of the lending mechanism

The lending mechanism includes the work of the bank in providing and repaying a loan, which can be conditionally divided into four stages in accordance with the stages of the lending process:

Stages of the lending mechanism

At the first stage of the implementation of the lending mechanism the client submits to the bank an application for a loan, which indicates the intended purpose of the loan, the requested amount and term of the loan, a brief description of the event being financed, the security of the loan and the mechanism for its repayment. A number of documents are attached to the application. For example, for legal entities the most typical:

• title documents of the client (constituent documents, registration certificates, copies of passports, etc.)
• feasibility study of the financed event (business plan, etc.)
• copies of contracts and agreements related to the credited event;
• financial statements of the client for the last year and the reporting period;
• obligations to ensure the repayment of the loan.

For individuals, this is a passport, a second identity document, a certificate of employment, a certificate of income, a borrower's questionnaire, etc.

Documents are evaluated according to 5 criteria.

Then, within the framework of this stage, the lending mechanism implies the need to determine the creditworthiness of the borrower.

Banks have different approaches to assessing the creditworthiness of legal entities and individuals, while legal entities are differentiated into large and medium-sized, small enterprises and micro-enterprises. This determines the combination of credit assessment methods used in the lending mechanism.

The creditworthiness of large and medium-sized enterprises is assessed on the basis of reporting data, credit application, credit history, information about the borrower, his management. The system of financial ratios, analysis of cash flow, business risk and management are used for evaluation.

Mandatory coefficients for assessing the creditworthiness of enterprises

In addition to these ratios, cash flow analysis and business risk assessment are used.

For small and micro-enterprises, the use of these methods is difficult due to the scale of their activities, the state of accounting and the depth of reporting, often there are no audit results. As a result, the assessment of creditworthiness is based on the knowledge of the bank's employees of this business, which involves a personal interview with the head of the enterprise, regular visits to the enterprise.

The main goal is to find out the purpose of obtaining a loan, the source and repayment period.

The creditworthiness of small and micro enterprises is assessed according to the following system:

Assessment of the creditworthiness of small enterprises and micro-enterprises

The creditworthiness of an individual is assessed according to the following indicators:

• the ratio of the requested loan to his personal income
• general assessment of the financial position of the borrower and the value of his property
• family composition
• personal characteristics
• study of credit history

Methods for assessing the creditworthiness of an individual

When scoring, a system of criteria and corresponding indicators of the borrower's ability to repay the principal and interest to the bank is used. For example, on the basis of individual indicators, the significance of which is determined through the differentiation of the level of the maximum score, approximately the following model can be used

Scoring system of indicators

Evaluation criterion	Number of points received	Maximum score for each criterion
Client profession
Family status
The duration of the bank account
Average account balance
Place of receipt of salary (whether the salary is transferred to the bank account)
Loan dynamics
Credit term
Having a debit balance on a current account
Use of a checkbook

Depending on the points scored, the client's class is determined in terms of creditworthiness.

If the indicator is recognized by the bank as sufficient, then an assessment is made on additional solvency factors. Solvency indicators are based on data on the income of an individual and the degree of risk of losing this income.

If a positive decision is made the next step in the lending mechanism is the conclusion of a loan agreement and the issuance of a loan.

A loan agreement in the form of a loan agreement acts as the main instrument for securing loan repayment for banks. This is due to the fact that the loan agreement concluded between the bank and the borrower determines the legal and economic conditions of the loan transaction and is a legal document, all clauses of which are binding on the parties that have concluded it. The real obligations of the client to repay the loan arise only after receiving the loan, but the signing of the contract is carried out earlier.

A loan agreement is a legal guarantee for the repayment of a loan.

At the same time, one cannot rely only on the legal side in securing the repayment of a loan. If the borrower turns out to be insolvent, then no legal guarantees will be able to return the issued resources to the bank. At best, this process will stretch for a long period, which leads to the loss of part of the bank's profit from a particular transaction. Another feature of the loan agreement follows from the fact that the bank's credit operations are of a fiduciary nature. The positive decision of the bank on the client's request for a loan is based on a study of the creditworthiness of a particular borrower.

As part of the loan agreement, the bank uses legal instruments to protect against credit risk associated with a decrease in the creditworthiness of the borrower. Various kinds of legal guarantees should be fixed in the relevant clauses of the loan agreement.

The credit agreement assumes a certain confidence of the creditor that the debtor will fulfill all the obligations associated with the concluded transaction.

Issuance of a loan is carried out in one of three ways, which provides for the mechanism of lending in banks.

The third stage in the lending mechanism constitutes security for the payment of interest on the loan, repayment of the principal loan and control over the execution of the loan agreement. In modern practice, the following options for repaying the principal and interest on a loan are distinguished:

1. periodic repayment of the loan by covering urgent obligations;
2. loan repayment as the need for borrowed capital decreases to form own funds by direct debits from the borrower's current account;
3. transfer of part of the proceeds from sales to repay the loan by indirect write-offs without crediting to the borrower's current account;
4. regular repayment of the loan by planned payments fixed in the loan agreement;
5. deferred repayment of the loan or covering it with other obligations;
6. write-off of overdue debt in accordance with the options provided for by the bank's credit policy.

It should be noted that the first three options are typical for lending to legal entities, the fourth option is used in the framework of lending to individuals. The fifth and sixth options correspond to the practice of working with problem loans. At the same time, regardless of the form of repayment of the loan, the terms of repayment of the loan taken by borrowers are specified in the form of urgent obligations in the numbers in which the need for a loan is calculated, in accordance with the provided reduction in loan debt, which takes into account the actual amount at the beginning of the period.

The fourth stage in the lending mechanism- This is a procedure for repaying a loan and interest on the principal debt, which can be implemented in banks in accordance with several forms.

Forms of loan repayment according to the lending mechanism

	Loan repayment form	Note
	Planned repayment by the borrower of the principal amount of the loan and interest on the debt through regular payments in accordance with the procedure stipulated in the loan agreement.	Direct crediting of funds to a loan account can occur either by direct crediting of cash at the bank's operating cash desks, or by bank transfer or electronic transfer initiated by the borrower himself.
	Regular debiting by the creditor bank of funds from the borrower's current account opened with the same bank on the basis of an appropriate instruction issued by the borrower.	With this form, a regular write-off occurs if there are funds on the current account on the calendar date specified in the payment order for regular transfers to the loan account. In the absence of funds on the specified date, the payment is automatically placed in the queue until the required amount appears on the borrower's current account.
	Independent transfer by the creditor bank from the current account to the loan account of the free balance of funds on the current account, which remains after early write-offs.	With this form, the write-offs are not fixed and reduce the principal amount unevenly, which corresponds to the repayment of the loan as the need for borrowed capital decreases. This form is most typical for legal entities engaged in trade and commercial activities.
	Collection in an indisputable manner from the borrower's account.	It is implemented by collecting debt on loan payments in amounts corresponding to the amounts of overdue payments. This form is used for problem loans.
	Bank advance payment.	It is used by the bank in case of unsecured debt on the issued loan. This form can also be used in cases where the borrower ceases to comply with the terms of the loan agreement, if such a procedure for early recovery of the principal amount of the debt is provided for in the loan agreement.

If, as part of the control over the execution of the loan agreement, the creditor bank establishes that the borrower has no real opportunities to repay the loan and interest for its use, then in accordance with the loan agreement, the bank may claim for collection the amount of the entire outstanding loan and interest in an indisputable manner from the guarantor's account or orders without further notice. In addition, it is possible to ensure the interests of the bank, as a creditor, by satisfying them from the amount of property pledged by the borrower in accordance with the terms of the loan agreement.

The Bank exercises systematic control over the fulfillment of the terms of loan agreements, the targeted use by borrowers of loans received. In order to timely and fully return the loaned value, the lending mechanism assumes the continuity of such control and maintaining close contact with the borrower during the entire period of the loan.

Loan repayment according to the lending mechanism

After full compliance with the terms of the loan agreement and payment of the debt, the cycle corresponding to the lending mechanism ends with the loan repayment stage. In accordance with the considered loan repayment options corresponding to the third stage, it is possible to classify the loan repayment process depending on the following set of criteria.

1. Full and one-time loan repayment is most typical for small loans, and the transfer of funds by the borrower does not cause him any difficulties.
2. Partial and multiple repayment of a loan is the most common, repayment of credit debt occurs gradually, it takes some time to fully settle with the bank.
3. Systematic loan repayment corresponds to a situation where the borrower has an intensive payment turnover, transfers are made by planned payments or by transferring the free part of the sales proceeds.
4. The occasional repayment of a loan corresponds to targeted loans that are issued for certain needs, using balance-compensation loan accounts.
5. Urgent repayment of a loan can take place with any loans, in accordance with the established loan term from several days to a year or more, when the loan agreement fixes specific conditions for implementing the principle of urgency of lending.
6. In addition, banks can use such repayment options, formed by modern lending practice, such as, for example, deferred, overdue and early repayment of a loan.

Regardless of the loan repayment option, the lending mechanism implies the need for regulation and special registration of the fact that the borrower repays the loan taken. This can be a special document that gives grounds for closing the loan, for example, a written order of the borrower, confirmed by a bank statement on the transfers made in favor of repaying the debt, an order of the creditor bank, issued after the expiration of the loan agreement on the basis of the loan paid by the borrower. In disputed cases, arbitration and court decisions are used.

conclusions

The lending mechanism is today the main form of providing funds for a certain percentage charged for the use of funds, one of the main forms. Credit relations are fixed by a loan agreement, which ensures both the rights of the creditor and the borrower.

By allowing banks to accumulate capital, it provides them with the opportunity, through a lending mechanism, to provide loans on the terms of their return after a certain period.

As a continuous process, lending mechanism provides the basic conditions for the functioning of the credit system at the level of the national economy.

Lending mechanism includes all actions for issuing a loan and its subsequent repayment and represents a consistent implementation of the stages of the credit process for planning, granting, using and repaying a loan.