Banks use the credit appraisal services for themselves before providing loan to a borrower. The Credit Appraisal process is based on careful analysis of various facts and data provided by the borrower to the bank. After the proper credit appraisal process, banks takes a decision to either fund the project or reject the proposal. This in-depth study is called the pre-sanction credit appraisal which helps the approver to sanction the loan to the borrower.
Credit appraisal takes care of
Borrower’s ability to complete the project and its intention to re-pay the loan after commissioning of the project
All the technical details related to the project like project requirement, end product, maintenance, project specifications, quality etc.
All the financial details related to the project like Cash Inflow, Cash Outflow, NPV, Break Even period, growth opportunity etc.
Financial appraisal to determine whether the company will be able to repay the loan from incremental cash flows or not.
Market Appraisal to determine whether the project is viable or not and what are chances of being successful
Reduces risk involved in the loans provided for a project
Increase confidence among the corporate bankers and improved sales decision
Reduces NPA (Non-Performing Assets) and possibility of financial loss