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Chapter 3
The lender’s assessment of
creditworthiness
4.1 Introduction
When an entity (a borrower) is seeking to raise debt finance, the lender (for example
the bank) will carry out an assessment of the borrower to decide whether to lend.
4.2 Information presented by the borrower to the lender
Business plan
Contents include:
the purpose, amount and duration of the borrowing
detailed cash flow forecasts, showing the likely cash flows of
the borrower and aiming to show the lender that the prospects
for the borrower are good
an explanation of how the borrower is proposing to repay the
borrowing.
4.3 Assessment of creditworthiness by the lender
Detailed review of the potential borrower
analysis of business plan
assessment of business prospects
security available
credit rating
other borrowings/covenants
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