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  3. What credit risk assessment is involved in sole proprietorship and partnership c

What credit risk assessment is involved in sole proprietorship and partnership c

游客2025-06-21  21
问题 What credit risk assessment is involved in sole proprietorship and partnership company loan?
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答案 A sole proprietorship is a business owned by an individual who will be responsible for business debts up to the full extent of his personal assets.
    The following points should be considered in assessing and minimizing the risk when evaluating a loan request from a sole proprietor:
    a. Checking the business registration certificate to establish that the borrower is the sole owner of the business.
    b. Since the borrower may have substantial personal assets outside the business, so ascertain his personal net worth.
    c. Find out how the borrower’s net worth has been accumulated, i.e. what has been built up from his own efforts, from inheritance, or speculative gains.
    d. Check out if the borrower is experienced in the particular business which he is running and for which he is requesting a loan.
    e. Check out if the borrower has a good track record in running a successful and profitable business.
    2. A partnership is a business in which two or more persons join together for the purpose of carrying on a business with a view to making profit.
    To assess the partnership as a credit risk, the banker ought to follow these steps:
    a. Establish the names of ail partners by cheeks on the company’s registered office or the partnership deed.
    b. Evaluate the partnership’s repayment ability by analyzing information obtained from its statements of account.
    c. Ascertain the reputation of the partnership; where partnerships are professional firms such as solicitors, accountants etc., information can easily be obtained from the customer’s professional associations.
    d. Find out the personal net worth of individual partners as the bank may have to call on their private resources in case the partnership being unable to meet its financial obligations.
    e. Analyze the background of each partner to see if he/she has a good track record in running a successful business.
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