Professional Documents
Culture Documents
HANIA FAYYAZ
F10BA015
FARIHA NASIR
F10BA045
JAVARIA GHALIB
F10BA052
ANAM SHOUKAT
F10BA053
NOOR SANA
F10BA054
SUBMITTED TO:
SIR AMIR SARWAR
TOPIC:
CORPORATE LOANS
CORPORATE
A legal entity that is separate and distinct from its owners. Corporations enjoy
most of the rights and responsibilities that an individual possesses; that is, a
corporation has the right to enter into contracts, loan and borrow money, sue and
be sued, hire employees, own assets and pay taxes.
CORPORATE BANKING
Those products and services that relate to the lending activities between a bank
and its clients. This could be a simple secured or unsecured loan, or it could be a
highly sophisticated structured finance transaction with many different banks or
syndicates involved in the transaction. Cash management and trade finance also
fall under the definition of corporate banking.
CORPORATE vs COMMERCIAL BANKING
National Bank
Allied Bank
Habib Bank
MCB
Meezan Bank
Company incorporation
Payroll
Corporation tax
Tax registeration
Corporate loans
LOAN
Definition:
An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the
property or repay the money, usually along with interest, at some future point(s) in time.
TYPES OF LOANS
Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business.
Secured loans
UnSecured loans
Personal Loans
Secured loans
UnSecured loans
A loan which is not backed by some collateral
Personal Loan:
Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans
and payday loans.
The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid
increases as well.
A loan to a business so that it can buy buildings, equipment etc, rather than to a person.
To meet the temporary mismatch in the cash flows & for other general purposes, we sanction corporate loans.
Asset-based lending
Asset-based lending
Asset-based lending is when the loan given is secured by means of some sort of asset.
In corporate lending an asset-based loan may use real-estate, intellectual property, or expensive equipment.
Asset-based lending is one of the more secured forms of corporate lending, since the bank lending the money has
protected itself by balancing the value of the assets with the amount of the loan
One of the more traditional routes is to obtain a loan based on company cash flow. Banks tend to favor these types of
loans because they are based on actual revenue generation by the company.
Cash-flow based loans don't require any collateral. Instead, they are based on the expected income of the company and
its credit rating.
This is probably the most dangerous form of corporate lending, as it is unsecured by any sort of real guarantee.
Equipment Loan
Acquisition Loans
A working capital loan is funding for the business to use in its day-to-day activities
Businesses may also use these loans to pay suppliers or pay employees.
These corporate mortgages are used if businesses want to own office space instead of rent it, or if a business wants to
buy land for a specific purpose, such as growing an orchard or harvesting raw materials.
These loans are difficult for many entrepreneurs to obtain, because lenders want proof that they will be paid back.
Collateral of some type is typically required, and banks ask to see detailed business plans so they can be sure that the
entrepreneur has enough skill and experience to make the business profitable.
These loans often have high interest rates and collateral requirements to make up for the risk.
Lines of credit are not immediate loans, but credit accounts that businesses can open to draw funds from when
necessary.
An arrangement between financial institutions, usually a bank and a company that establishes a credit limit of a
company, that is, the maximum amount of credit a company is allowed.
The company can draw down on the line of credit at any time, as long as it does not exceed the maximum set in the
agreement.
Lines of credit are often extended by banks, financial institutions and other licensed consumer lenders to creditworthy
company customers .
Equipment/Asset Loan
Equipment or Asset loans are among the simplest types of corporate loans. These smaller loans help businesses buy
major assets.
Manufacturers need to buy factory equipment, transporters need vehicles, and offices need computer software and
hardware.
These are large expenses, and many expanding businesses need a loan in order to buy such equipment
Acquisition Loans
Acquisition loans are loans taken out by larger corporations interested in taking over another company.
Takeovers require a large amount of cash, since the corporation must buy out seats on the board of directors and
purchase a large amount of company stock.
Acquisitions loans are designed to provide acquiring companies with the funds to absorb other businesses successfully.
Feasibility Report is an evaluation and analysis of the potential of the proposed project which is based on extensive
investigation and research to give full comfort to the decisions makers. Which resources will be required? What will
be the required cost of the project and value to be attained?
Is the purpose for which company wants loan from the bank feasible? To identify about this entire bank wants
feasibility report.
Certificate of commencement of business (COB):
A Certificate of Commencement gives the right to a Public Limited Company to commence business. A Public
Company can commence business only after obtaining this certificate from the SECP. Bank will grant loan only to
the company having Certificate of commencement of business.
Projected Financial Statements
Company should submit NBP its seven year projected Financial Statements along with their assumptions. With the
help of financial information bank will make loan memo. The reason would be to check the ability of a company to
repay the loan. This will help the bank to take decision about a company that will it be in a position to clear its debt
or not.
Search Report
SECP contains record of the amount of charges present against different assets of the companies. Based on the
charge information of a company provided by SECP, NBP create Search Report through its lawyers.
Certified Copy of Form A
Company has to submit National Bank of Pakistan the Certified Copy of Form A from SECP. Form A gives the
shareholding structure of a company and contains information pertaining to authorized Capital, Paid up Capital,
shareholders, share capital and brief particulars of Chief Executive, Chief Accountant, Legal Advisor, Company
Secretary and Auditors along with list of directors.
Certified Copy of Form 29
Company has to submit National Bank of Pakistan the Certified Copy of Form 29 from SECP. Form 29 provides all
relevant information pertaining to directors, chief executive, managing agent, secretary, chief accountant, auditors
and legal adviser of a company. The form 29 provides detailed information about directors i.e. name, father name,
CNIC number, address, nationality and business/occupation.
eCIB Report
National Bank of Pakistan sends loan and companys directors information to State Bank of Pakistan. SBP with the
help of this information from eCIB report. Bank checks the credit worthiness of a company through eCIB report.
If eCIB report of the company is satisfactory NBP starts loan assessment and appraisal process.
NBP reviews credit reports, the amount of available collateral, income and existing debts of a company.
In general they look at:
Companys ability to make the monthly payments on the mortgage and to afford the costs associated is primary
considerations in loan approval process.
Recording sanction is the last event in this activity.
Issuance of Sanction Letter
After checking the credit history of the company NBP issues company Sanction letter. In sanction letter NBP tells
company about its terms and conditions, penalties, Repayment period and the amount of interest that will be
charged, based on
Loan Interest Rate = KIBOR +interest
Execution of Loan Agreement
If the bank has no objection on the terms and conditions given by the bank in the sanction letter company then it
signs the agreement for approval of loan.
Disbursement of Loan
When all the steps of loan processing are completed bank disburse loan to the company.
ISLAMIC BANKING
Currently there are six licensed full-fledged Islamic Banks and twelve conventional banks with standalone
Islamic Branches in Pakistan
Islamic Banking department of SBP controls all the activities of Islamic banks.
The State Bank of Pakistan issued a No Objection Certificate in no time on August 19, 2004 and Bank
Islami Pakistan Limited, the second full-fledge Islamic Commercial Bank in Pakistan, was incorporated on
October 18, 2004 in Pakistan.
Bank Islami Pakistan Limited was the first Bank to receive the Islamic Banking license under the Islamic
Banking policy of 2003 on March 31, 2005
. On September 26, 2005, Dubai Bank joined the Sponsors and became one of the founding shareholders of
Bank Islami by investing 18.75% in the total Capital
In Arabic term Riba is a synonym for the term interest used in conventional banking operations.
Riba means charging predetermined additional amount on a loan extended based on length of credit period.
Riba (interest) is a very important term in the Islamic terminology showing disapproval and it refers to the
instrument by which a loaner charges some amount lump sum or in installments over and above his
principal amount from the loanee and thus increases his wealth manifold without participating in the
business process of profit and loss.
Medium to long-term loans are provided for purchase or building of fixed assets by firms to expand or
replace theexisting assets. Under Islamic financial system requirement of firms and individuals are fulfilled
through MurabahaBaiMuajjal and Istasna. Another financing option for long-term financing is profit
sharing under Musharaka and Mudaraba. Although financing under Murabaha, BaiMuajjal and Istasna is
very much look like conventional loans with the only difference of provision of asset and not cash to client
however differences exist in the contracts which alter the nature of risks and returns.
The Corporate Banking Division (CBD) works on a long-term relationship based business to provide a single point
within the bank for meeting all business requirements of its corporate and institutional customers, including public
sector enterprises, with the primary objective of enhancing customer service.
CBD operates through three focused Corporate Centers/Regions in Karachi, Lahore and Islamabad, staffed by a highly
professional relationship management team comprising of qualified and industry experienced individuals. Each region
is also supported by a dedicated Corporate Branch geared towards providing a one-stop solution to all branch banking
needs including cash management, of its institutional clients.
The Asian Development Bank (ADB) has provided a $750,000 grant to promote
Islamic banking in Indonesia, Pakistan, Bangladesh and Afghanistan.
Credit risk
Liquidity risk
Operational risk
Legal risks
Credit risk
Credit risk arises from non performance by a borrower. It may arise from either an inability or an unwillingness to perform in the
pre-committed contracted manner. The real risk from credit is the deviation of portfolio performance from its expected value.
Credit risk is diversifiable but difficult to eliminate completely. This is because a portion of the default risk may, in fact, result
from the systematic risk.
Operational risk
Operational risk is associated with the problems of accurately processing, settling, and taking or making delivery on trades in
exchange for cash. It also arises in record keeping, processing system failures and compliance with various regulations.
Operatingproblems are small but they expose a firm to outcomes that may be quite costly.
Legal risk
Legal risk arises from the activities of an institution's management or employees. Fraud, violations of regulations or laws, and
other actions can lead to catastrophic loss. court opinions and regulations can put formerly well-established transactions into
contention even when all parties have previously performed adequately and are fully able to perform in the future.
Acquiring clients with good creditworthiness and enhancing their proportion of the banks loan portfolio
Properly assessing the risks associated with lending to its corporate clients
Managing the banks overall exposure to corporate credit risks as represented in the loan portfolio
Setting up clear guidelines on what to do in case of a clients bankruptcy
Achieving a price for its loans that is adequate for the risk the bank is exposed to by the individual loan.
IMPORTANCE
To run a success business depends upon a lot of things. A planned business strategy plays an important role. Second and foremost
important thing is the finance. Without a good financial backup, you will not be able to get success in your business. Business
finance loan may help you in running the business successfully.
Business finance loan is especially designed to fit all the business requirements. People from small, medium and big businesses
can obtain business finance loan. On the other hand, people with bad credit suffering from CCJs, bankruptcy, defaults, arrears,
etc. can also look for such loans.
Whether you are starting a business, expanding your present business or for any other business purposes, business finance loan
could help you in all possible way.
Main benefits of business finance loan are its flexibility. Business profits are not fixed, it changes almost all the time so, it is a
great help for the borrowers to manage their repayment period. Flexible business finance loan makes it more convenient for the
borrowers in repaying the loan.
To get an easy loan approval, you need to show your business plans, projects and profit statements. You also need to shop around
for getting the loans at competitive rates of interest. Browse different financial websites and search for different loan offers.
Consider you financial requirements and choose one of the best loan deals.
Apply for Business finance loan now through online process and raise funds for your business. Implement your plans and strive
for excellence.
Benefits
Another benefit of getting a business loan is that, if the loan is lent to a corporate entity, the loan will not usually have to be
repaid by the business owner if the company fails. In the event of failure, the business is liquidated, which helps pay back part
(sometimes all) of the funds borrowed. Many business owners keep this advantageous aspect in mind when borrowing money
because it is only the corporation that will go bankrupt in the event of loan default, not the owner personally.
What is particularly advantageous about seeking a business lone in the current climate is that interest rates are unbelievably low
right now. As the liquidity of banks increases in the wake of the recessions brunt, banks are increasing the rate at which they lend
and interest rates will soon rise to compensate. A large loan taken out now or in the near future will have much lower overhead
than will one taken out in two years time, making this the opportune time to plan expansion.
Ultimately, all business owners should evaluate their wants and needs before contacting a lender. This allows the business owner
to see which type of lender is the best fit for their company. Similarly, it is crucial that business owners take the time to read the
all of the terms and conditions accompanying any business loan they are considering. There are often early repayment penalties
associated with a loan and it is important to obtain a business loan that does not incorporate these penalties, as prepaying a loan in
full can save a business a large amount of money in interest.