How to prepare and analyze the CIBI Report

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Introduction

The Credit Investigation and Background Investigation (CIBI) report is the primary tool of the bank in screening its MF clients.

It shows the results of the investigation done by the bank to establish the loan applicant’s charactercharacter and and repayment capacity repayment capacity

This session will equip the participants with data gathering skills to the preparation of the CI/BI report.

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Objective

At the end of this session, participants will be able to:

1. Prepare an exhaustive CIBI report for new borrowersnew borrowers which focuses on the client’s character and capacity capacity to pay to pay

2. Prepare a complete CIBI report for repeat borrowersrepeat borrowers which focuses on repayment behavior on past loans and status of client’s business.status of client’s business.

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Who prepares the CIBI Report?

Account Officer prepares the CIBI report by gathering and evaluating information, and establishing applicant’s creditworthiness.

MFU Supervisor reviews and validates the accuracy of information in the CIBI report.

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How to conduct the CIBI

1.You should have the applicant’s Loan Application and CIBI Forms when you conduct the CIBI. Study beforehand the information in the Loan Application for faster verification in the field.

2.Conduct the interview with the character references. Follow the flow process provided in the overview module.

3. In interviewing character references, observe the tips provided in the previous session on Loan Application.

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Types of CIBI Report

CIBI Report for New Borrowers (CIBI-N)

CIBI Report for Repeat Borrower (CIBI-R)

New BorrowersNew BorrowersCIBI Report

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The CIBI–New Form

o The CIBI form for new borrowers is a seven-page document composed of four-parts namely:

1) results of interview with client,

2) character references,

3) character and cash flow analysis, and

4) AO & Supervisors Findings and Recommendations.

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Outline of the CIBI-N Form (Part 1)

Part 1 – Results of Interview with the ClientPart 1 – Results of Interview with the ClientI. Personal InformationII. Business InformationIII. Market Risk AnalysisIV. Payment RecordsV. Inventory of Business AssetsVI. Merchandise InventoryVII. Inventory of Personal AssetsVIII. Balance Sheet

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Outline of the CIBI-N Form (Part 2 & 3)

Part 2 – Results of Interview with ReferencesPart 2 – Results of Interview with ReferencesIX. Interview with Character ReferencesX. Interview with Barangay Official

Part 3 – Character & Cash Flow AnalysisPart 3 – Character & Cash Flow AnalysisXI. Character & Risk Analysis checklistXII. Red FlagsXIII. Cash Flow ComputationXIV. Cash Flow Risk AnalysisXV. Suggested Courses of Action

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Outline of the CIBI-N Form (Part 4)

Part 4 – Findings & RecommendationsPart 4 – Findings & RecommendationsXVI. Account Officer’s Finding & RecommendationsXVII. MF Supervisor’s Review Results

Repeat BorrowersRepeat BorrowersCIBI Form

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The CIBI for Repeat Borrowers/LoansRepeat Borrowers/Loans should start at least two (2) weeks before the maturity of the current loan to ensure a quick turn-around time for the re-loan (remember quality service).

The CIBI–Repeat Form

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Outline of the CIBI-R Form

The CIBI report for repeat borrowersrepeat borrowers consist of four (4) pages and contain the following:

I. Analysis of Repayment Behavior II. Results of monitoringIII. Savings Balances IV. Business Data V. Market Risk Analysis VI. Inventory of Business AssetsVII. Merchandise InventoryVIII. Inventory of Personal Assets

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Outline of the CIBI-R Form

VIII. Comparative Balance Sheet

IX. Cash Flow & Comparative Cash Flow Analysis

X. Cash Flow Risk Analysis

XI. Suggested Courses of Action

XII. Account Officer’s Findings & Recommendation

XIII. MF Supervisor’s Review Results

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Comparison of CIBI FormsInformation SuppliedInformation Supplied CIBI-NewCIBI-New CIBI-RepeatCIBI-Repeat

1. Business information Yes Updated

2. Market risk analysis Yes Updated

3. Payment records Yes Optional

4. Inventory of business assets Yes Updated

5. Merchandise inventory Yes Updated

6. Inventory of personal assets Yes Updated

7. Balance Sheet Yes Updated/Comparative

8. Interview with character references

Yes Optional

9. Interview with Barangay Official Yes Optional

10. Checking with Other Financial Institutions

Yes Optional

11. Results of Monitoring Yes

12. Savings balances Yes Yes

12. Cash flow analysis Yes Updated/Comparative

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Repayment Capacity

CASH FLOW ANALYSIS

The preparation of the Cash Flow will be presented in detail in:

Session 4 - Cash Flow Lending

Session 5 - Preparing the Cash Flow

Session 6 - Cash Flow Review Techniques

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To Summarize -

A properly accomplished CIBI gives the Account Officer a clear basis for recommending the approval or rejection of a loan application.

When done properly, the CIBI report provides a vivid description of the “story” of a loan applicant to the credit committee that decides on the loan application.

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To Summarize -

The information in the CIBI Report should be analyzed in the light of character indicators. The character indicators provide the bases for assessing the level of risks of granting a loan to an applicant.

Character analysis together with the cash flow analysis positions the bank to make better decision on the loan amount the bank can afford to risk with a borrower.

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To Summarize -

Therefore, the use of the CIBI tools for analyzing character and cash flow decreases the level of risk when lending to microentrepreneurs who do not have hard collateral and credit history.

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This information can be lifted from the loan application form. This is repeated here to serve as a guide to the account officer on what questions to ask to the applicant and to the character references.

Fill in the official FULL first and last name of the applicant. If the applicant goes by a different name, write in parenthesis afterwards. Example: Manuel J. Cruz (Maning)

RURAL BANK OF XYZ, INC.CREDIT INVESTIGATION FORM FOR NEW LOAN APPLICATION

NAME OF APPLICANT: Major Business Activity:___________________________________________ Secondary Business Activities: ______________________________________________________________________________________

Business Registration Permit No:_________________________ (Municipal/City Hall or Barangay Office)

Get this data if your loan product eligibility criteria requires it. The business registration permit attests that the microenterprise activity can legally operate in the specified trade area.

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I – Business Information

Sales Frequency Daily Weekly Semi-monthly Monthly Others :

Gross Sales Low : Average : High :

How often is the business open? Mon Tues Wed Thurs Fri Sat Sun

Business Trends Peak Months :

Slow Months :

Average Months:

Working Capital information:

How often do you buy stocks? Daily Weekly Semi-monthly Monthly Others :

How much do you spend each time?

Where do you usually buy your stocks?

How are stocks purchased? Cash Consignment Credit : What terms? _________

Sales frequency indicates how often money from the business comes in (used as an input for the Cash Flow)

Indicates the amount of sales from the business cycle as when sales are daily, how much comes in a slow day, in a busy day, etc.

The more operating days the business has, the greater the sales potential

High or low months in terms of sales guide decisions on whether to increase, maintain or reduce loan amounts.

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II - MARKET RISK ANALYSIS(For loan P50,000 and above)

Factors Description Potential Problems/Risks

1. Clients

2. Supplies

3. Production/Sales/Services

4. Others

A Market Risk Analysis is important to establish if the applicant has a clear understanding of his/her market and the capacity of the business to cope with demand

1. Who are the applicant’s clients?2. Do they buy on wholesale or retail?3. Do they buy cash or credit (e.g. 15-30)

and what is level of sales on credit?4. Is the business market limited only to

local area and is there much competition?

1. Does the applicant have a regular supplier? A regular supplier would indicate increased business transactions.

2. Are stocks readily available when needed?3. Is the supplier reliable?4. Are supplies bought in “Cash” or “On

Credit?” If on Credit, what are the terms?

1. What could negatively affect business production or sales?

2. Can the business increase production or sales easily or not?

1. Indicate seasonality of applicant’s business2. Will the proposed loan term fall during a lean or

a peak season?

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This section of the CIBI report must be completely filled-up. The account officer must ask to see copies of official receipts (OR’s) or proofs of payments. To get a better handle of the applicant’s repayment behavior, AO must request receipts for the last 3 months prior to loan application.

III - PAYMENT RECORDS

Receipts of Bills Business(Check 3-months receipts &

get average amount)

Household(Check 3-months

receipts & get average amount)

Comments (on-time/delinquent, etc.)

Water

Electricity

LandlineCell phone (post paid)

Mortgage/Rental payments

5-6 payments

Provides the Account Officer with information on the applicant’s repayment behavior

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IV - INVENTORY OF BUSINESS ASSETS[Machiknery, furnitures, fixtures, etc]

Qty. Description Approximate Value

Include all assets used in the business; these could be used as loan guaranty (security agreement)

HOW TO COMPUTE APPROXIMATE VALUE:Purchase Price minus Accumulated Depreciation = Approximate Value

Definition of Terms:Depreciation –the decrease in the value of an asset due to “wear and tear” , obsolescence or impairment. Usually computed annually by dividing the purchase price of the asset by the useful life of the asset (ex. P5,000 / 5 yrs. = P1,000 depreciation expense yearly)Accumulated Depreciation – the total of Depreciation already expensed by the business. This amount is deducted from the Purchase Price of the asset to get its Net Value (or Approximate Value)Purchase Price – Amount paid to buy the asset

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V – MERCHANDISE INVENTORY (List down the five[5] fastest selling/largest items)

Qty. Description Unit Cost Estimated Value (Qty. x

Unit Cost)

Unit Selling Price

Total

Most retail outlets (sari-sari stores) have different items in their merchandise inventory. Limit the list to the five (5) fastest selling items since this could provide a rough estimate of the sales and purchase levels.

Indicate quantity; include unit of measure (kgs., bottles, cans, etc.)

Description of merchandise (e.g. sardines, laundry soap, softdrinks, etc.)

Unit buying price of merchandise

Total Purchase Cost (Quantity x Unit Cost)

Unit selling price for each item of merchandise

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VI - INVENTORY OF PERSONAL ASSETS[Real Estate and other personal properties (appliances, etc)]

Qty. Description Approximate Value

Personal assets could serve as guarantees, should the bank require them (especially for larger ticket loans)

If asset has a potential for use as a guarantee, check for ownership documents

• Relate the approximate value of the asset to its age• During the visit to the applicant’s residence, check condition of the assets

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VII - BALANCE SHEET

ASSETS LIABILITIES

Cash on hand and in Bank P Loan Payable P

Accounts Receivable Other Payables

Business Assets Total Liabilities

Merchandise Inventory

Personal Assets Total Networth

Total Assets Total Liabilities and Networth

• Shows the joint financial condition of the business and the household • Shows if the size of the business/business assets can support the requested loan amount

Should include whatever cash the applicant actually has on hand and in deposits with any institution (data on deposit may be retrieved from the Loan Application Form (Savings Information)

Include all collectibles the applicant has, whether from the business or personal loans to other persons

Should reflect the combined value of inventory of (1) Personal Assets (household or serialized assets), (2) Business Assets (microenterprise activities), and (3) Merchandise Inventory

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VIII - INTERVIEW WITH CHARACTER REFERENCES

Source # 1: Supplier Creditor Landlord



Source # 4: Residential

Business Neighbor

Source # 5: Residential Business Neighbor

Source # 6: Residential Business Neighbor

Fill in the full first and last name of the person interviewed

Indicate the reference category of the interviewee by putting a √ in the appropriate box.

Provides the Account Officer with independent information on the applicant’s reputation

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A - INTERVIEW WITH CREDITORS/SUPPLIERS/LANDLORDS(Interview with suppliers applicable for loans P50,000 and above/Write N/A if not applicable)

Source # 1 Source # 2 Source # 3

Are you a relative of the applicant? Yes No Yes No Yes No

How long has the applicant been purchasing/borrowing/renting?

< 1 yr > 1 yr

< 1yr > 1 yr

< 1 yr > 1 yr

Does the applicant pay on time? Yes No Yes No Yes No

How often does the applicant place an order (daily, weekly, monthly)?

How much does the applicant spend per order?

What is the term of payment? (Cash, On credit, what’s the term?)

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B - INTERVIEW WITH RESIDENTIAL AND BUSINESS NEIGHBORS

Source # 4: Source # 5: Source # 6:

Are you a relative of the applicant?

Yes No Yes No Yes No

Have you known the applicant for more than two years?


Has the applicant lived in the community for over two years?


Is the applicant of good moral standing in the community?


Is the applicant debt-free?


Has the applicant been involved in any legal dispute (if yes, explain in box below)?


Is the applicant known to be:

Gambler Irresponsible

Violent Drug abuser

Womanizer Indebted

Alcoholic Trouble-maker

Explanation on any negative reference:

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IX – INTERVIEW W/ BARANGAY OFFICIAL(If Barangay Clearance does not provide information on legal cases)

Name: Is the applicant known to be: Gambler Indebted Womanizer Violent Alcoholic Irresponsible Drug abuser Trouble-maker

Are you a relative of the applicant Yes No

Have you known the applicant for more than two years?

Yes No

Has the applicant lived in the community for over two years?

Yes No

Is the applicant of good moral standing in the community?

Yes No

Is the applicant debt-free? Yes No

Has the applicant been involved in any legal dispute (if yes, explain in box below)?

Yes No

Explanation on any negative aspects:

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A) Indicators of StabilityYes No Married? Married with children? Children attending school? Resident in the same community for over two

years? Home owner? Business in operation for over two years? Business in the same location for over two years? Business in fixed location (non-ambulant)? Client has post-paid cellular phone

Character & Risk Analysis ChecklistStabilityStability

These indicators show how “rooted” an applicant is –

or how difficult it is for an applicant to leave town and

the loan obligation.

The absence of any of these indicators does not mean that an

applicant cannot qualify for a loan –it simply means that the risk of

lending is higher

When analyzing stabilitylook for permanency

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B) Indicators of EntrepreneurshipYes No Has multiple sources of income? Business in operation for over five years? Business is located in commercial area? Applicant keeps financial record? Applicant explains clearly use of loan? Only for loans P25,000 and above Applicant has clear explanation of business expansion? Applicant has clear vision of market and competition?

Client does not have all of his/her money invested

in one business. Should one business fail, s/he

has other sources which can pay for the loan

Business growth over the years means that a client

has survived several years of trials (economic, political,

natural calamities); this means that client has good entrepreneurial

skills.

Having multiple businesses

Is a clear indicator of

entrepreneurship

Character & Risk Analysis ChecklistEntrepreneurshipEntrepreneurship

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C) Indicators of ReputationYes No Applicant belongs to/holds position in community association? Applicant has a good reputation as confirmed by CIBI with neighbors? Applicant has good reputation as confirmed by CIBI with peers? Applicant has good reputation as confirmed by CIBI with suppliers/Landlords? Applicant is clear from legal cases at the Barangay? Applicant is clear from legal cases at the court?

Indicators of reputation have the biggest weight among the

4 risk categories.A bad reputation eliminates positive aspects about an

applicant

Be suspicious when character references refuse, or are hesitant to

provide information about the applicant

If interview results of reputation are mixed, the AO must interview more

references until s/he is completely satisfied with the applicant’s

reputation

If the applicant has legal cases, look further into the nature of the case. Double check for Collection

cases and cases involving moral turpitude.

Character & Risk Analysis ChecklistReputationReputation

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D) Indicators of Repayment BehaviorYes No Applicant has no outstanding loans with financial institutions? Applicant has no outstanding loans with appliance stores? Applicant has no outstanding loans with informal sources? Payments paid on due date or late not more than 3 days as confirmed by receipts. Bills paid on time as confirmed by payment slips/receipts? Rent is paid on time as confirmed by receipts? School fees paid on time as confirmed by receipts? Payment to suppliers paid on time as confirmed by ORs? Applicant has active savings/checking accounts? Last three bank statements show increasing balances? Applicant has credit line from suppliers? (NOTE: For first 3 questions, if any loan is outstanding,

mark the NO box)

It’s the person, not theBusiness, that pays a loan – therefore, how an applicant

pays his other obligations tells you how he will pay his loan

A refusal to show receiptscould indicate delays in payment that the applicant does not wantthe AO to find out

Funds used for family emergencies (illness) do not necessarily disqualify an applicant – It just tells you to becautious (the illness could take long to cure or recurrent).

Decreasing balances in bank depositscould indicate liquidity/cash problems.Find out where the funds went.

Character & Risk Analysis ChecklistRepayment BehaviorRepayment Behavior

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Red FlagsRed Flags - Warning Signals!

XI - RED FLAGS (mark all that apply)

The applicant inquires about donor financing The applicant provides contradictory information The spouse contradicts the information provided by applicant Applicant unable to provide receipts supporting information Difficulty in finding co-makers Children not sent to school References (neighbors, peers, suppliers) reluctant to express opinion on applicant.

The spouse refuses to sign the application or collateral authorization. History of violent behavior History of spouse/child abuse History of alcoholism History of gambling History of drug abuse The applicant has a criminal record.Red flags on this side almost disqualify an applicant.

Red flags are warning signals that could indicate a character flaw in the applicant; these should be carefully evaluated when doing the Character/Risk Analysis

Red flags on the right column should be strong grounds for rejection of the application

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XIII - CASH FLOW RISK ANALYSIS

Is the amount of the loan smaller than the size of the business? Yes No� �

Is the amount granted smaller than the amount requested by applicant? Yes No� �

Is the installment granted smaller than the installment requested by the applicant? Yes No� �

Is the amount granted less than 50% of the total assets? Yes No� �

Is the loan amount less than 50% of the expenses? Yes No� �

Compare computed maximum loan amount (in the Cash Flow) with Total Assets (Balance Sheet)• An asset size smaller than the loan amount will not be able to generate enough net income to be able to pay the loan.

Compare the Adjusted Repayment Capacity (Cash Flow) with the Installment requested by the applicant (Application Form)Compare maximum loan amount (Cash Flow)

with loan amount requested (Loan Application Form)

Provides Account Officers with some tips in analyzing repayment capacity

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XIV – SUGGESTED COURSES OF ACTION

Stability: Resident in the community for over two years, home-owner, and/or business in operation for over two years, are the most important indicators. If the applicant is not a resident in the community for over two years but (a) is a home-owner, and (b) his/her business has been in operation for more than 2 years, s/he could still qualify for a loan. The longer the number of years the business is in operation or the applicant has lived in the same community, the higher the stability.Entrepreneurship: Multiple sources of income and business in operation for over five years have the highest weight. Reputation: Indicators of reputation have the highest weight among the four categories of risk. If the results of reputation are mixed, the AO must interview more references until s/he is completely satisfied with the applicant’s reputation.Repayment behavior: If applicant has a good credit history, as proven by records or receipts, with a delay of less than three days in any payment, s/he is qualified to take a loan.

Guides/tips that may be used by the Account Officer to make a decision on the Character/Risk Analysis of the applicant.

These four (4) indicators are the benchmarks by which the Account Officer makes a decision whether or not to recommend a loan for approval.

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• Approval/rejection of the loan application, based on evaluation, should be clearly stated.• Recommended loan amount, loan term and repayment mode should be stated.• The statement at the bottom of the box reminds Account Officers not to provide false information, or deliberately withhold vital information that could mislead the CreCom into making the wrong decision on the loan application.

The CreCom will be putting a lot of weight on the information provided in this section as a basis for final evaluation and approval.

XV. Account Officer’s Findings & Recommendation(This should be based on the results of the 4 characterindicators analysis as well as cash flow analysis)

Account Officer’s Signature

I hereby certify that all the information stated in the Credit Investigation Report are true and correct and that I shall be held responsible for any misrepresentation._______________________________________________ Signature over Printed Name_______________________________________________ Date Report Completed and Submitted to Supervisor

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• Approval/rejection of the loan application, based on evaluation, should be clearly stated.• Recommended loan amount, loan term and repayment mode should be stated.• The statement at the bottom of the box reminds the Supervisor to review the CIBI reports to detect any false information that could mislead the CreCom into making the wrong decision on the loan application.

The CreCom will be putting a lot of weight on the information provided in this section as a basis for final evaluation and approval.

XVI. MF Supervisor’s Review Findings (This should be based on how well the AO has analyzed theCharacter and cash flow of the applicant)

MF Supervisor’s Signature

I hereby certify that I have reviewed the information and analyses contained in this Credit Investigation Report and that I concur with the findings and recommendations of the account officer.

_______________________________________________ Signature over Printed Name

_______________________________________________ Date-Review Completed and Submitted to Branch Manager

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RURAL BANK OF XYZ, INC.CREDIT ANALYSIS FORM FOR REPEAT LOAN

NAME OF APPLICANT: No. of Past Loans:

Indicate the number of loans the borrower has had with the bank. The more repeat loans, the more information the Account Officer has on the repayment behavior (check the Client Status Report)

Indicate the FULL Name of the borrower; as indicated in the Loan Application form.

Repeat Loan CIBI Form

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State causes for any delayed payments of four (4) days and over (last loan only)

Health problems Death in the family Marital problems Problems with sales

Loan diversion Problem with collection/receivables Multiple borrowing Other ______________

I - ANALYSIS OF REPAYMENT BEHAVIOR for the last three loans(This must be accomplished prior to client interview/investigation. Fill out the Client Classification column IF the Client Status Report is attached. )

No Loan Amount # of Inst. W Bi-Mo. Mo. Others On Time Payment

Maximum No. of days delayed Classification

# inst. % 1-3 4-6 7-13 14-29 30+

3

2

1

Maximum loan amount entitled for next loan P____________ (Note: Increase in the loan size should not exceed 30% of the previous loan)Amount requested by client P____________

Indicate whether loan is 1st, 2nd, 3rd, etc – starting with most recent loan

Indicate approved amount of each loan

Indicate number of loan installments

Check applicable mode of payment (weekly, semi-monthly, monthly, others-specify)

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Sample “Client Status Report”

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What do delays in payment signal?What do delays in payment signal?

Payments over 7 days past due indicate that the loan loan amount is too largeamount is too large

Partial payments indicate that the loan amount is too loan amount is too large large

A steady decline in the number of installments paid on time could mean the loan amount is becoming too loan amount is becoming too large large

Delays in Payment and Loan Size

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A borrower’s repayment behavior determines the Client’s Client’s ClassificationClassification. .

The Client Classification serves as a guide for determining increases in loan amount for the next loan cycle.

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Sample Client Classification Guide for Loans with Weekly Payments

CLIENT CLASSIFICATION AA A B C D

Percentage of On-time/Full repayment 100% 90% 80% 60%

Below 60%

% INCREASE IN LOAN AMOUNT Up to 30% Up to 20% Up to 10% No Increase No Loan

A. LOAN TERM & NO. OF WEEKLY INSTALLMENTS NUMBER OF ON-TIME/FULL PAYMENT

2 months - 8 installments 8 7 6 5





Note: Note: Note:

But no missed payment exceeding 3 days, otherwise, no increase.

But no missed payment exceeding 3 days, otherwise, no increase.

But no missed payment exceeding 3 days, otherwise, no loan

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The general rule: the increase should be no no more than 30%more than 30% of the previous loan for clients with 100% on-time fullclients with 100% on-time full repayment repayment but subject to results of account monitoring.

When the increase being requested by the client is more than 30%more than 30% of the previous loan, account officer must do a new cash flow to establish any improvement in the repayment capacity of the client (Refer to section on comparative cash flow).

Client Classification and Loan IncreaseClient Classification and Loan Increase

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Conditions to meet for not requiring a cash Conditions to meet for not requiring a cash flow analysisflow analysis

1. 100% on-time full repayment of the previous loan

2. Loan term for the next loan is less than 6 months

3. Increase over the previous loan is not higher than 10%.

4. Repeat loan amount is within the loan entitlement calculated in the previous

cash flow analysis.

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Put a √ in the appropriate box if statement applies, otherwise, provide updated information in the Repeat Loan Application Form

II. RESULTS OF MONITORING

Business Condition

Increase in Business Assets Increase in Merchandise Inventory Same business location Change to a better business location Increase in number of employees Increase in number of days or hours of operation/ Expanded trade area or distribution network

Decrease in Business Assets Decrease in Merchandise Inventory Change to a lesser attractive business location Decrease in number of employees Decrease in number of days or hours of operation/ Reduced trade area or distribution network

Shows business growth, stagnation or deterioration. Deteriorations could mean

decreased ability to pay loans

Analysis of the Cash Flow should closely evaluate the relationship of repayment behavior and improvements/ deteriorations of the business.

Any increases in loan amount should be evaluated in the light of the borrower’s demonstrated repayment behavior.

Consider seasonal trends that affectthe borrower’s business (weather,

business location, seasonalityof demand)

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Put a √ in the appropriate box if statement applies, otherwise, provide updated information in the Repeat Loan Application Form

II. RESULTS OF MONITORING

Household Condition

Other household income continue to be the same if not better No health problems within the family Household assets remain the same if not better Same home address Change to a better residential location No conflicts in family relationships

Job loss of any household member Health problems Decrease in household assets Death in the family Change of home address Marital problems Court/Barangay cases of any household member

Family problems, illness, loss of income (retrenchment,

business closure, etc)could signal decreased

liquidity.

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III - SAVINGS BALANCES(This must be accomplished prior to client interview/investigation)

Type of Account Balances during the last three months Remarks for decreasing balances only

Decreasing balances in bank deposits could indicate liquidity/cash problems. Find out where the funds went.

Indicate here the type/s of deposits that client keeps in your bank. AO should request CASA bookkeeper to print a statement of balance

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IX – COMPARATIVE BALANCE SHEET

ASSETS LIABILITIES

Previous Amount

Current Amount

Change Previous Amount

Current Amount

Change

Cash on hand and in Bank Loan Payable

Accounts Receivable Other Payables

Raw Materials

Goods in Process

Finished Goods Total Liabilities

Total Assets

Other Assets Total Networth

Total Assets Total Liabilities and Networth

• Shows changes in the asset base of the business• Shows trend for business growth /deterioration• Increase in loan amount should be justified by business growth

Net change must be positive to justify an increase in loan amount

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XI - COMPARATIVE CASH FLOW (Add information about new cash flow if required; otherwise, just provide results of previous cash flow)

Previous Loan Current Loan Change

Total Business Income

Less : Total Business Expense

Net Business Income

Add : Total Household Income

Less : Total Household Expense

Net Household Income

Maximum Loan Entitlement

Reflect data of the latest Cash Flow

• THIS IS TO BE USED WHEN CLIENT IS ASKING FOR AN INCREASE OF MORE THAN 30% OF THE PREVIOUS LOAN. •Shows improvements/deteriorations in the Cash Flow• Provides inputs with respect to decision on loan amount of the repeat loan

Positive change indicate improve cash positions – improved repayment capacity

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XIII - SUGGESTED COURSES OF ACTION

If delays happened at the end of the loan term, AO must consider:-Decreasing the loan amount-Repeating the same loan amount-Suspending additional loans until situation gets under controlIf delays happened at the beginning, business has already recovered. AO can proceed with increase as allowed by the client classification and cash flow. The AO can also request a higher increase as an exception case. If repayment behavior deteriorates from one loan to the next, client must be reaching borrowing limit. AO must consider not to grant any increases.If repayment behavior rapidly deteriorates from AA to C, the last amount granted was already too high. AO must consider to reduce loan amount or discontinue servicing the client.If the delay was caused by health problems, the AO must evaluate if the situation is solved (one time occurrence) or recurring (e.g. dialysis). If problem is recurring, the AO must consider not granting additional loans.If payments are consistently late, the problem might not be the size of the loan but the client.

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XIII - SUGGESTED COURSES OF ACTION

If client has multiple borrowings (from other lending institutions) but no delayed payments beyond 3 days, the AO must check repayment behavior with other sources to confirm good standing (delay no higher than 1-3 days).If client has multiple borrowings and has delays of four days or more, the AO must consider suspending any additional loans until loan with other institution is repaid in full.If savings balances are declining, the business or household might be experiencing liquidity problems. The AO must investigate the causes of the decline. If there are no clear justifications, the AO must consider reducing or suspending the loan until the situation gets under control.If it’s a repeat loan, the AO will do the cash flow analysis every other loan ONLY if repeat loan amount is the same or within 10% increase, not more than P25,000, loan term is 6 months or less, and the client has not made payments with delay of not more than 3 days. If a borrower does not meet these qualifications, a cash flow analysis will be done for every loan.

How to prepare and analyze the CIBI Report

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Transcript of How to prepare and analyze the CIBI Report