The creditworthiness of a commercial bank client is the ability of the borrower to fully and on time pay off his debt obligations (principal and interest).

The creditworthiness of the borrower, in contrast to its solvency, does not fix non-payments for the past period or on any date, but predicts the ability to repay the debt in the short term. The degree of insolvency in the past is one of the formal indicators that are based on when assessing the creditworthiness of a client.

The level of creditworthiness of the client indicates the degree of individual (private) risk of the bank associated with the issuance of a particular loan to a particular borrower.

These methods include:

Business risk assessment;

Management assessment;

Assessment of the client's financial stability based on a system of financial ratios;

Cash flow analysis;

Collection of information about the client;

Supervision of the work of the client by going to the place.

Despite the unity of the criteria and methods of assessment, there is specificity in the analysis of the creditworthiness of legal entities and individuals, large, medium and small customers. This specificity lies in the combination of the assessment methods used, as well as in their content.

Assessment of the creditworthiness of large and medium-sized enterprises based on the actual data of the balance sheet, income statement, loan application, information about the history of the client and his managers. The system of financial ratios, analysis of cash flow, business risk and management are used as methods for assessing creditworthiness.

In world and Russian banking practice, various financial ratios are used to assess the borrower's creditworthiness. Their choice is determined by the characteristics of the bank's clientele, possible causes of financial difficulties, and the bank's credit policy. All coefficients used can be divided into five groups:

I - liquidity ratios:

II - coefficients of efficiency, or turnover;

III - financial leverage ratios;

IV - profitability ratios;

V - debt service ratios.

The creditworthiness indicators included in each of these groups may vary greatly. An example is the following system (Table 6.1).

Table 6.1

The current liquidity ratio (Ktl) shows whether the borrower is in principle able to pay off his debt obligations.

The current liquidity ratio implies a comparison of current assets, i.e. funds that the client has in various forms (cash, net receivables, inventory values ​​and other assets), with current liabilities, i.e. liabilities of the nearest maturity (loans, debt to suppliers, bills, budget, workers and employees). If the debt obligations exceed the funds of the client, the latter is insolvent. From this follow the normative levels of the coefficient. The value of the coefficient, as a rule, should not be less than 1. An exception is allowed only for bank customers with a very fast capital turnover.

Quick (operational) liquidity ratio (Kbl) has a slightly different semantic load. It is calculated as follows:

Liquid assets are that part of current liabilities that relatively quickly turns into cash ready to pay off debt. Liquid assets in world banking practice include cash and receivables, in Russian - also a part of quickly sold reserves.

The purpose of the quick liquidity ratio is to predict the borrower's ability to quickly release funds in cash from its turnover to repay the bank's debt on time.

Efficiency (turnover) ratios complement the first group of coefficients - liquidity indicators and allow you to make a more informed conclusion. For example, if liquidity ratios are growing due to an increase in accounts receivable and the cost of inventories while they are slowing down, the borrower's credit rating cannot be upgraded. The group of efficiency coefficients includes:

Inventory turnover:

Accounts receivable less provision for bad debts.

Efficiency ratios are analyzed over time and compared with those of competing firms and with industry averages.

Financial leverage indicators characterize the degree of provision of the borrower with own capital.

As can be seen from Table. 6.1, the options for calculating the coefficients may be different, but their economic meaning is the same: to estimate the amount of equity capital and the degree of dependence of the client on the attracted resources. Unlike liquidity ratios, when calculating financial leverage ratios, all debt obligations of a bank client are taken into account, regardless of their maturity. The higher the share of borrowed funds (short-term and long-term) and the lower the share of equity, the lower the client's creditworthiness class. However, the final conclusion is made only taking into account the dynamics of profitability ratios.

profit ratios characterize the efficiency of the use of all capital, including its attracted part. The varieties of these coefficients are:

In world banking practice, when calculating efficiency ratios, net sales are taken into account instead of sales proceeds, i.e. revenue in terms of material and labor costs.

Rate of return ratios

If the share of profit in sales proceeds grows, profitability of assets or capital increases, then it is possible not to lower the client's rating even if the financial leverage ratio deteriorates.

Debt service ratios (market ratios) show how much of the profit is absorbed by interest and fixed payments. The total amount of their calculation is as follows.

The specific methodology for determining the numerator of these coefficients depends on whether interest or fixed payments are related to cost or paid from profit.

Debt service ratios show how much of the profit is used to repay interest or all fixed payments. These coefficients are of particular importance at high inflation rates, when the amount of interest paid may approach or even exceed the principal debt of the client. The greater part of the profit is directed to cover the interest paid and other fixed payments, the less it remains to pay off debt obligations and cover risks, i.e. the worse the client's creditworthiness.

The listed financial ratios can be calculated on the basis of actual reporting data or forecast values ​​for the planned period. When the economy is stable or the client's position is relatively stable, the assessment of the borrower's creditworthiness in the future may be based on actual performance in past periods.

When issuing loans for relatively long periods (a year or more), it is also necessary to receive from the client, in addition to a report for past periods, a forecast balance, a forecast of income, expenses and profits for the upcoming period corresponding to the period of the loan. The forecast is usually based on planning the rate of growth (decrease) in sales proceeds and is substantiated in detail by the client.

Cash flow analysis - a method for assessing the creditworthiness of a client of a commercial bank, which is based on the use of actual indicators characterizing the turnover of funds from the client in the reporting period. This method of cash flow analysis is fundamentally different from the method of assessing the creditworthiness of the client on the basis of a system of financial ratios, the calculation of which is based on balance reporting indicators.

Cash flow analysis consists in comparing the outflow and inflow of funds from the borrower for a period that usually corresponds to the term of the requested loan. When issuing a loan for a year, the analysis of cash flow is done on an annual basis, for a period of up to 90 days - on a quarterly basis, etc.

The elements of the cash inflow for the period are:

Profit received in this period;

Depreciation accrued for the period;

Release of funds from:

a) stocks;

b) accounts receivable;

c) fixed assets;

d) other assets;

Increase in accounts payable;

Growth in other liabilities;

Increase in share capital;

Issuance of new loans.

As elements of the outflow of funds can be identified:

a) taxes;

b) percent;

c) dividends;

d) fines and penalties;

additional investment in:

a) stocks;

b) accounts receivable;

c) other assets;

d) fixed assets;

reduction of accounts payable;

decrease in other liabilities;

equity outflow;

repayment of loans.

The difference between the inflow and outflow of funds determines the amount of total cash flow. As can be seen from the above list of elements of inflow and outflow of funds, changes in the size of inventories, receivables and payables, other assets and liabilities, fixed assets affect the total cash flow in different ways. To determine this effect, balances are compared for inventory items, debtors, creditors, etc. at the beginning and end of the period. An increase in the balance of inventories, debtors and other assets during the period means an outflow of funds and is shown in the calculation with a "-" sign, and a decrease is an inflow of funds and is recorded with a "+" sign. An increase in creditors and other liabilities is considered as an inflow of funds ("+"), a decrease - as an outflow ("-").

The cash flow analysis model is based on grouping the elements of inflow and outflow of funds by areas of enterprise management. These areas in the cash flow analysis model (CFA) can correspond to the following blocks:

Enterprise profit management;

Inventory and settlement management;

Management of financial liabilities;

Tax and investment management;

Management of the ratio of equity and loans.

In this case, the ADP model may have the following form (Table 6.3).

Table 6.3. Cash flow analysis

The described method of cash flow analysis is called indirect. The general content of the direct method is as follows. Total cash flow (Net cash) = Increase (decrease) in cash as a result of production and economic activities + Increase (decrease) in cash as a result of investing activities + Increase (decrease in cash as a result of financing activities. Calculation of the first term: Revenue from sales - Payments to suppliers and staff + Interest received - Interest paid - Taxes Calculation of the second term of the total cash flow: Proceeds from the sale of fixed assets - Capital investments Calculation of the third term: Loans received - Repayment of debt obligations + Issuance of bonds + Issuance of shares - Payment of dividends

For the analysis of cash flow, data are taken for at least three past years. If the client had a steady excess of inflow over outflow of funds, then this indicates its financial stability - creditworthiness. Fluctuations in the value of the total cash flow, as well as a short-term excess of the outflow over the inflow of funds, indicate a lower credit rating of the client. Finally, the systematic excess of the outflow over the inflow of funds characterizes the client as insolvent.

Analysis of cash flow allows us to draw a conclusion about the weak points of enterprise management. For example, the outflow of funds may be associated with inventory management, settlements (debtors and creditors), financial payments (taxes, interest, dividends). Identification of weaknesses in management is used to develop lending conditions reflected in the loan agreement. For example, if the main factor in the outflow of funds is excessive diversion of funds into settlements, then a "positive" condition for lending to a client may be maintaining the turnover of receivables during the entire period of using the loan at a certain level. With such an outflow factor as an insufficient amount of equity capital, compliance with a certain standard level of the financial leverage ratio can be used as a credit condition.

To address the issue of the appropriateness and amount of a loan for a relatively long period, the cash flow analysis is done not only on the basis of actual data for past periods, but also on the basis of forecast data for the planned period. Actual data is used to evaluate forecast data. The forecast of the value of individual elements of the inflow and outflow of funds is based on their average value in previous periods and the planned growth rate of sales proceeds.

business risk- this is the risk associated with the fact that the circulation of the borrower's funds may not be completed on time and with the intended effect. Business risk factors are various reasons that lead to discontinuity or delay in the circulation of funds at certain stages. Business risk factors can be grouped according to the stages of the circuit.

I stage - the creation of stocks.

Number of suppliers and their reliability,

Capacity and quality of storage facilities,

Compliance of the method of transportation with the nature of the cargo,

Availability of prices for raw materials and their transportation for the borrower,

The number of intermediaries between the buyer and the producer of raw materials and other material assets,

Remoteness of the supplier;

Economic forces;

Fashion for purchased raw materials and other values,

currency risk factors,

The danger of introducing restrictions on the export and import of imported raw materials.

Stage II - production stage:

Availability and qualifications of the labor force;

Age and capacity of equipment;

Equipment load;

Condition of production facilities.

Stage III - sales stage:

The number of buyers and their solvency;

Diversification of debtors;

Degree of protection against non-payment of buyers;

The borrower's affiliation to the base industry by the nature of the finished product being financed;

The degree of competition in the industry;

Influence on the price of the credited finished product of public traditions and preferences, the political situation;

The presence of problems of overproduction in the market of these products;

demographic factors;

Currency risk factors;

The possibility of introducing restrictions on the export from the country and the import into another country of products.

In addition, risk factors at the marketing stage can be combined from the factors of the first and second stages. Therefore, the business risk at the marketing stage is considered to be higher than at the stocking or production stage.

In conditions of economic instability, the analysis of business risk at the time of issuing a loan significantly complements the assessment of the client's creditworthiness based on financial ratios, which are calculated on the basis of average actual data of past reporting periods.

The listed business risk factors are necessarily taken into account when the bank develops standard forms of loan applications, feasibility studies of the possibility of issuing a loan.

The assessment of business risk by a commercial bank can be formalized and carried out according to a scoring system, when each business risk factor is evaluated in points (Table 6.4).

Table 6.4

A similar business risk assessment model is applied based on other criteria. Points are assigned for each criterion and summed up. The higher the score, the lower the risk and the greater the likelihood of completing the transaction with a predictable effect, which will allow the borrower to repay their debt obligations on time.

Client's credit rating is determined on the basis of the main and additional indicators. The key indicators selected by the bank must be unchanged for a relatively long time. In the document on the credit policy of the bank or others, these indicators and their standard levels are recorded. The latter are focused on world standards, but are individual for a given bank and a given period.

The client's creditworthiness class is determined on the basis of the main indicators and is adjusted taking into account additional ones.

Creditworthiness class according to the level of key indicators can be determined on a point scale. For example: I class - 100-150 points; II class - 151-250 points; III class - 251-300 points. To calculate the scores, the indicator class is used, which is determined by comparing the actual value with the standard, as well as the significance (rating) of the indicator.

The rating, or significance, of the indicator is determined individually for each group of borrowers, depending on the policy of a given commercial bank, the characteristics of the client, the liquidity of their balance sheet, and market position.

The overall assessment of creditworthiness is given in points. The scores are the sum of the products of the rating of each indicator by the creditworthiness class. I class is assigned with 100-150 points, II class - with 151-250 points and III class - with 251-300 points. An example of determining the amount of points is given in Table. 6.5.

The credit grade adjustment is that bad additional indicators can lower the grade as well as raise it. The following data can be cited as an example (Table 6.6):

Table 6.6

The same level of performance and rating in points can be achieved due to various factors, some of which are associated with positive processes, while others are associated with negative ones. Therefore, to determine the class, factor analysis of creditworthiness ratios, balance sheet analysis, and the study of the state of affairs in an industry or region are of great importance.

Creditworthiness of small enterprises can be assessed in the same way as the repayment capacity of large and medium-sized borrowers - based on financial credit ratios, cash flow analysis and business risk assessment.

However, the bank's use of financial ratios and the cash flow analysis method is difficult due to the state of accounting and reporting for these bank customers.

One more feature of small enterprises should be noted - their managers and employees are often members of the same family or relatives. Therefore, it is possible to mix the personal capital of the owner with the capital of the enterprise. This implies the following feature in the organization of bank credit relations with small businesses abroad (USA): loan repayment is guaranteed by the owner, namely his property. But in this regard, when assessing the creditworthiness of a small client, the financial situation of the owner is taken into account. The latter is determined on the basis of a personal financial report.

The personal financial report form contains information about the assets and liabilities of an individual. In this case, pledged assets and secured liabilities are distinguished. Assets include cash, stocks and bonds, receivables from relatives, friends and others, real estate, life insurance buyout value, etc. Liabilities consist of debts to banks, relatives and others, bills and taxes owed, the value of mortgaged property , payments under contracts, loans used for insurance payments, etc. For a more detailed analysis, a breakdown of certain types of assets and liabilities of an individual is given.

Thus, the system for assessing the creditworthiness of small borrowers by a bank consists of the following elements:

Business risk assessment.

Supervision of the work of the client.

Personal interviews of the banker with the owner of the enterprise.

Evaluation of the personal financial situation of the owner.

Assessment of the creditworthiness of an individual is based on the ratio of the requested loan and his personal income, a general assessment of the financial situation and property, family composition, personal characteristics, studying the client's credit history.

The first section contains information about the bank employee issuing the loan, the client's dossier number, the name of the agency, the type and amount of the loan, the frequency of its repayment, the interest rate without insurance payments, the date of the loan, the day of the month chosen by the client for its repayment, the answer to the question on the need for insurance, the absolute amount of the monthly repayment of the loan with and without insurance payment, the total amount of interest and insurance payments to be paid to the bank.

In the second section of the program, data are entered on the client's profession, his belonging to a certain social group, employer, net annual earnings, expenses for the year, work experience.

The third section - the financial situation of the client - contains information about the balances on current and savings accounts, the ratio of income and expenses

Based on the input of the listed information, the bank employee receives an opinion whether it is possible to issue a loan. If the answer is negative, the bank agency may refer the client to its directorate for additional consideration of the issue of the possibility of granting a loan.

In addition to credit history, the system for assessing the creditworthiness of an individual by American banks includes the following indicators, debt-to-income ratio, income stability and duration of work in one place, length of residence at one address, amount of capital.

When lending to individuals, small sizes of loans are typical, which gives rise to a large amount of work on their registration and a rather expensive procedure for assessing creditworthiness in relation to the resulting profit. In this case, credit risk consists of the risk of non-repayment of the principal amount of the debt and interest on this amount.

To assess the creditworthiness of individuals, the bank needs to assess both the financial position of the borrower and his personal qualities. At the same time, qualitative and quantitative indicators of the economic situation of the borrower are assessed. The assessment should be carried out in three stages:

• 1) assessment of the quality indicators of the borrower's activities;
• 2) assessment of quantitative indicators of the borrower's activities;
• 3) obtaining a summary assessment - a forecast and the formation of a final analytical conclusion.

An assessment of the creditworthiness of an individual is carried out on the basis of an analysis aimed at identifying objective results and trends in its financial condition. The main sources of information for assessing the creditworthiness of the borrower are: financial statements, information provided by the borrower, the experience of other persons with this client, the scheme of the credited transaction with a feasibility study for obtaining a loan, on-site inspection data.

Qualitative analysis is also implemented in stages:

• 2) determination of the purpose of the loan;

The reputation of the borrower is studied very carefully, while the analysis of the client's credit history, that is, the past experience with the client's loan debt, is very important. Information characterizing the business and personal qualities of an individual borrower is carefully studied. The facts or absence of facts of non-payments on loans, etc. are also established.

Determining the borrower's creditworthiness is an integral part of the bank's work to determine the possibility of issuing a loan. The analysis of the borrower's creditworthiness is understood as the assessment by the bank of the borrower in terms of the possibility and expediency of granting loans to him, determining the likelihood of their timely repayment in accordance with the loan agreement. For this purpose, use:

• - financial ratios;
• - cash flow analysis;
• - business risk assessment.

The basis of the analysis of the creditworthiness of an individual is the collection of the necessary information that most fully characterizes the client, the main objectives of the analysis of which are:

• 1) identifying the strengths of the applicant's situation;
• 2) identifying the weaknesses of a potential borrower;
• 3) determining which specific factors are most important for the continued success of the borrower;
• 4) possible risks in lending.

Loan officers' analysis of clients' financial statements takes two forms: internal and external. External analysis consists of comparing a given borrower with others. Internal analysis involves comparing different parts of the financial statements with each other over a period of time over time.

Internal analysis is often referred to as ratio analysis. Although important to the analytical process, financial ratios have two disadvantages:

• 1) they do not provide information about how the client's operations are proceeding;
• 2) present outdated information.

Therefore, a bank analyst has to work not only with actual data, but also with an assessment of “complex” information (views, estimates, etc.).

In most Western countries, the analysis of the creditworthiness of individuals is carried out in the following areas:

• 1) Personal capacity - personal qualities of a potential borrower (honesty, seriousness of intentions, characterization as a good employee, etc.).
• 2) Revenues - client's income, analysis of the total family income. At the same time, it is considered that the client's expenses for loan repayment should not exceed one third of the client's monthly income.
• 3) Material capacity - loan security, including analysis of the client's movable and immovable property.

However, a more complete analysis is often required, for example, based on an assessment of the borrower's cash flow, that is, in the cash flow analysis process. Cash flow is a measure of a borrower's ability to cover their expenses and repay debt with their own resources. Compiling a cash flow statement allows you to answer the following questions:

• - whether the borrower provides himself with funds for further growth of financial assets;
• - whether the growth of the borrower is so rapid that it requires financing from external sources;
• - whether the borrower has excess funds to use them to repay the debt or subsequent investment.

It is advisable to use this form of the borrower's cash flow statement to analyze the prospects for repayment of the loan. The initial information for assessing the client's creditworthiness is a special section of the loan application - "Calculation of monthly income" (table 1.1.)

Table 1.1. - Calculation of the monthly income of an individual

By checking the client's disposable income in this way and comparing it with the monthly debt service amount (principal and interest), the bank can easily determine the client's solvency. If the amount of debt service exceeds the amount of disposable income, then the client's application is rejected. The solvency of a potential borrower is assessed by the bank as good if the debt service amount is less than 60% of its current expenses.

It is also necessary to assess the reputation of the borrower. One of the possible methods of its assessment is the method of credit scoring. The scoring model is usually developed by each bank independently based on the characteristics of the bank and its clientele. The essence of this technique is that each factor characterizing the borrower has its own quantitative assessment. Summing up the points obtained, you can get an assessment of the creditworthiness of an individual. Each parameter has a maximum possible threshold, which is higher for important questions and lower for secondary ones.

The scoring method allows you to conduct an express analysis of a loan application in the presence of a client. For example, in French banks, a client who applied for a personal loan and filled out a questionnaire can receive a response from the banker about the possibility of providing a loan within a few minutes.

Most American banks use in their practice:

• 1) systems for assessing the creditworthiness of customers based on expert assessments of the analysis of the economic feasibility of granting a loan;
• 2) scoring systems for assessing the creditworthiness of customers.

By using peer-reviewed customer credit scoring systems, banks rely on a general economic approach when analyzing a customer's creditworthiness. Banks analyze the information in the light of the main banking requirements and then decide whether to grant a loan or refuse to issue it. This approach to the analysis of the client's creditworthiness is a weighted assessment of the personal qualities and financial condition of the borrower.

The use of a quantitative assessment of the client's creditworthiness involves assigning a certain group to one or another type of loan, one or another type of borrower and determines in points the value of various characteristics of a potential borrower. The banker then simply calculates the total score and compares it to the loan or rejection model.

Scoring systems are created by banks based on an empirical approach using regression mathematical analysis or factor analysis. These systems use historical data on bank "good", "safe" and "bad" loans and allow you to determine the criteria level of borrower evaluation.

In banking practice, direct and indirect methods of analyzing the creditworthiness of customers are distinguished.

Direct methods are rarely used. They assume that the amount of points scored by the client is actually equal to the amount of the loan to which he is entitled.

Indirect methods are widely used. Their essence lies in giving certain weights (points) to various evaluation indicators, and the result of the evaluation is the derivation of the client's creditworthiness class.

Based on the data obtained, a potential client's creditworthiness group is determined: an excellent borrower; good; average; bad; insolvent. However, it is not enough to find out the borrower's creditworthiness class. It is also important to determine the amount and term of the loan to which he is entitled. For this, a table of allowable amounts for issuing consumer loans as a percentage of the client's annual income is used.

In the process of analyzing the individual creditworthiness of individuals, it is important to use the credit scoring method very carefully, since, especially when issuing long-term loans, the situation in the process of executing a loan agreement changes greatly and there is a serious risk of default on the loan.

If the total score exceeds the amount specified in the model, then the bank provides the borrower with a loan, if it is lower than the named amount, then the loan is denied. Usually there is a certain gap between the minimum and maximum scores, and when the actual number of points falls within this gap, the bank makes a lending decision based on general economic and legal factors.

There are many methods of credit scoring known today. One of the most famous is the Durand model. Duran identified a group of factors that make it possible to determine the degree of credit risk as much as possible. He also determined the coefficients for various factors characterizing the creditworthiness of an individual:

• - gender: female (0.40), male (0);
• - age: 0.1 point for each year over 20 years, but not more than 0.30;
• - period of residence in the area: 0.042 for each year, but not more than 0.42;
• - profession: 0.55 - for a profession with low risk; 0 - for a profession with a high risk; 0.16 - other professions;
• - financial indicators: having a bank account - 0.45; availability of real estate - 0.35; availability of an insurance policy - 0.19;
• - work: 0.21 - enterprises in the public sector, 0 - others;
• - employment: 0.059 - for each year of work at the given enterprise;

He also determined the threshold, having passed which, a person was considered creditworthy. This threshold is equal to 1.25, i.e. if the accumulated score is greater than or equal to 1.25, then the potential borrower is given the amount requested by him.

A significant drawback of the scoring system for assessing the creditworthiness of individuals is that it is very poorly adaptable. And the system used to assess creditworthiness should correspond to the present state of affairs. For example, in the USA it is considered a plus if a person has changed many jobs, which indicates that he is in demand. In the USSR, on the contrary, this circumstance indicated that a person either could not get along with the team, or was a low-value specialist, and, accordingly, the likelihood of delays in payments increased. Another example of the difference in weight coefficients is that if in the USSR the presence of a personal car indicated a good financial situation of the borrower, now this presence practically does not mean anything. Thus, it is simply extremely necessary to adapt the model both for different periods of time, and for different countries and even for different regions of the country.

Thus, there are two main drawbacks of the scoring system for assessing the creditworthiness of individuals:

• 1) the high cost of adapting the model used to the current state of affairs;
• 2) a high probability of a model error in determining the creditworthiness of a potential borrower, due to the subjective opinion of a specialist.

To adapt the scoring model for assessing the creditworthiness of individuals, it is necessary to determine a set of factors with weighting coefficients plus a certain threshold (value), overcoming which a person applying for a loan is considered able to repay the requested loan and interest. However, the results obtained will be mostly subjective opinion and, as a rule, poorly supported by statistics (statistically unfounded). As a consequence of all this, the resulting model does not fully correspond to the current reality. The financial result of this approach will be that in the interest rate of lending offered by the bank, a large share will be occupied by the part that covers the risk of non-payments.

Thus, the use of scoring systems for assessing the creditworthiness of clients is a more objective and economically sound decision-making process than the use of expert assessments. The only difficulty is that customer credit score systems must be statistically carefully verified and require constant updating of information, which can be disadvantageous for banks. According to the results of the analysis of creditworthiness, the more points the client scored, the higher the level of his creditworthiness.

When conducting a creditworthiness analysis, banks pay special attention to assessing the personal qualities of the borrower. They can request the necessary certificates, including from the place of work of the borrower, and check the accuracy of the information provided in the client's questionnaire. If the banker revealed inaccuracies in the client's answers and came to the conclusion that the potential borrower deliberately misled the bank, then the client automatically receives a refusal to grant him a loan.

Capital valuation refers to the determination of the client's wealth. It is closely related to assessing the financial capacity of the client in terms of his ability to repay the loan, along with normal day-to-day expenses and other debt obligations. For almost all consumer loans, the client's income is the main source of repayment. Therefore, the bank evaluates the sufficiency of the client's own funds for the timely repayment of the loan after the satisfaction of other claims and then compares this amount with the amount of periodic payments to repay the loan and interest on it.

The coefficient method is a more detailed analysis of the economic condition of the borrower. Therefore, bankers around the world pay special attention to the analysis of financial ratios, for example, indicators of liquidity, turnover of funds, equity, profitability or on the basis of cash flow, as a result of which the borrower's creditworthiness class and its rating are determined.

To determine the amount of adequate credit risk coverage for consumer loans, it is advisable to calculate special indicators, coefficients that characterize the minimum amount of payments to repay the loan and the maximum allowable amount of debt in relation to the client's income:

K1 = Min / D, (1)

where Min - the minimum amount of payments to repay the loan

D - client's income

K2 = Max / D, (2)

where Max is the maximum allowable amount of debt

Using such coefficients, the banker evaluates: the correspondence of the amount of income indicated in the questionnaire to the amount of the actual income of the client, the stability of the sources of income and determines the conditions for repaying the loan, taking into account the possibility of the borrower losing part of the income due to a decrease in overall business activity or a decrease in the competitiveness of this type of business, etc. .d.

Conclusion to subchapter 1.3: Summarizing the above, the analysis of the creditworthiness of an individual is to determine the prospects for repayment of the amount of debt by the client on time and without additional costs on the part of the bank.

Conclusion to chapter I: Based on the results of studying the theoretical foundations for assessing the borrower's creditworthiness, the following conclusions can be drawn:

1) Credit policy is the definition of the directions of the bank's activities in the field of credit and investment operations and the development of lending procedures that ensure risk reduction. The development of a competent credit policy is the most important element of banking management. The essence of the bank's credit policy is to ensure the safety, reliability and profitability of credit operations, that is, the ability to minimize credit risk.

2) Banking risk is the risk to which commercial banks are exposed. Credit risk is very significant for banks. It represents the risk for the lender that the borrower will not pay the principal and interest on it. The most common measure in the practice of banks aimed at reducing credit risk is the assessment of the borrower's creditworthiness.

3) An assessment by a bank of the creditworthiness of a borrower - an individual means an analysis of the possibility and expediency of providing funds to the borrower, determining the probability of their return in a timely manner and in full. The scoring system for evaluating potential borrowers is considered the most effective. It assumes the presence of at least three sections: information on the loan, information about the client, the financial situation of the client. Thus, the assessment of the creditworthiness of an individual is carried out on the basis of an analysis that is aimed at identifying objective results and trends in its financial condition. The main sources of information for assessing the creditworthiness of the borrower are: financial statements, information provided by the borrower, the experience of other persons with this client, the scheme of the credited transaction with a feasibility study for obtaining a loan, on-site inspection data. Qualitative analysis is also implemented in stages:

• 1) studying the reputation of the borrower;
• 2) determination of the purpose of the loan;
• 3) determination of the sources of repayment of the principal debt and interest due;
• 4) assessment of the borrower's risks assumed by the bank.

The reputation of the borrower is studied very carefully, while the analysis of the client's credit history, that is, past experience, is very important.

The creditworthiness of a client of a commercial bank is called the ability of the borrower within the specified period and to fully pay off the existing debt obligations (for interest and principal debt). Unlike solvency, creditworthiness for a certain date or for the past period does not fix non-payments, it predicts its ability to repay existing debt in the very near future. The level of client creditworthiness determines the level of risk of the bank, which is associated with the issuance of a loan to the borrower.

Customer Credit Criteria

Domestic and world banking practice makes it possible to identify some criteria for assessing credit risks and creditworthiness of customers:

The nature of the client;
financial capabilities, the ability to earn enough funds to pay off the debt;
capital;
securing a loan;
ability to borrow funds;
the conditions under which the credit operation will be carried out;
control.

Methods for assessing creditworthiness:

Initial collection of information about a new client;
assessment of financial stability;
cash flow analysis;
management assessment;
monitoring the work of clients by going to a specific place.

Financial ratios to assess the creditworthiness of clients of commercial banks

The choice of financial ratios is determined by the characteristics of the bank's clientele, the bank's credit policy, as well as possible causes of any financial difficulties. There are 5 main categories:

I - liquidity ratio;
II - turnover ratio or efficiency;
III - financial leverage ratio;
IV - profitability ratio;
V is the debt service ratio.

(KTL) is the current liquidity ratio, which shows whether the borrower is able to pay off all his debt obligations:

Calculate KTL:
KTL = Current assets / for current liabilities.

This ratio involves a comparison of all current assets, funds that the client has in various forms (this can be: cash, receivables at the nearest maturity, the cost of stocks of all available inventory items, other assets), with current liabilities, liabilities, requiring the nearest terms of their repayment (loans, debts to suppliers, debts on promissory notes, debts to the budget, debts to workers and employees). If the client's debt obligations exceed his funds, then he is considered insolvent.

The coefficient (KBL) of operational, quick liquidity is calculated as follows:

KBL = Liquid assets / current liabilities.

Liquid assets are called part of the current liabilities, one that can quickly turn into cash, which is ready to quickly pay off the debt. In banking practice, liquid assets include cash, as well as receivables, and in our practice, they also include a part of stocks that are quickly sold. Using the operational liquidity ratio, you can predict the ability of borrowers. quickly release from circulation all the funds necessary to repay bank debt on time.

All efficiency ratios are an excellent complement to liquidity ratios. They allow you to make the conclusion more justified. And if liquidity indicators grow due to an increase in the value of inventories or receivables while slowing down turnover, then it will not be possible to upgrade the creditworthiness of this borrower.

Inventory turnover is calculated as:

Turnover duration (measured in days):
To do this, you need to divide the average inventory balances by the one-day proceeds from the sale received;

The number of revolutions in this period:
Divide the proceeds from sales for a certain period by the average balances of those stocks that are available at that moment.

Accounts receivable turnover (measured in days):

Divide all average balances of debts in a given period by one-day sales proceeds.

Asset turnover:
Divide the proceeds from the sale by the average size of assets.

Fixed capital turnover:

Divide the proceeds from the sale by the average residual value of fixed assets.

All efficiency ratios are analyzed in dynamics, compared with the ratios of competing enterprises and industry averages.

Financial leverage ratios help to characterize the degree of borrowers' equity capital provision. All options for calculating the coefficient are different, but they all have the same economic meaning: this is the amount of equity capital, as well as the degree of dependence of clients on attracted resources.

It should be noted that when calculating the coefficient, all debt obligations of the bank's customers are taken into account. The higher the share of attracted funds (long-term and short-term), the lower will be the credit rating of clients. The final conclusion is made, taking into account the dynamics of profitability ratios.

All profitability ratios clearly characterize the efficiency of capital use, including all of its attracted part. There are such varieties:

Rate of return ratios:

Gross profit before taxes and interest divided by net sales or sales proceeds;
- Divide net operating income by net sales or sales proceeds;
- Net income after taxes and interest divided by net sales.

Profitability ratios:

All profits received before interest and taxes are divided by equity or assets;
- All profits received before taxes, but after interest, divided by equity or assets;
- Divide net income by equity or assets.

Comparing all three types of profitability ratios, you can get the degree of influence of taxes and interest on the profitability of the enterprise.

Rate of return on shares:

Earnings per share:
It is necessary to divide the dividends on the simplest shares by the average number of all the simplest shares;

Dividend income (%):
You need to multiply the annual dividend per share by 100 and divide by the average market price of one share.

Interest coverage ratio:
All profit for the period divided by interest payments for a specific period.

Fixed payment ratio:
All profit for the period divided by (lease payments + interest + dividends on shares + other payments).

Cash flow analysis as a method of assessing creditworthiness

In general, cash flow analysis is a method that helps to assess the creditworthiness of commercial bank customers, which is based on the use of all actual indicators that characterize the turnover of customer funds in the reporting period. This is precisely what distinguishes it from assessing the creditworthiness of clients based on financial ratio systems.

The entire cash flow analysis is based on a comparison of outflows and inflows from borrowers for the entire period corresponding to the term of the requested loan. The loan is issued for one year. Cash flow analysis should be carried out on an annual basis, for a period of up to 90 days, also on a quarterly basis, etc.

Elements of cash inflows for the entire period:

Profit that will be received in this period;
- depreciation, which will be charged for the period;
- release of all funds (from receivables, inventories, fixed assets and other assets);
- increase in share capital;
- increase in accounts payable;
- growth of other liabilities;
- issuance of new loans.

Elements of the outflow of funds:

Payment of taxes, dividends, interest, penalties and fines;
- additional investment of funds;
- reduction of other liabilities;
- reduction of accounts payable;
- repayment of loans
- outflow of share capital.

Small Business Credit Assessment

You need to know that the creditworthiness of small businesses is also assessed based on various financial credit ratios, business risk assessment and cash flow analysis.
Often, the use of cash flow analysis by a bank, as well as financial ratios, is difficult due to the state of reporting and accounting for bank customers. Typically, small businesses do not have a licensed accountant. At the same time, the costs of auditing are not available, and there is no audit confirmation of the borrowers' report, therefore, in connection with this fact, the creditworthiness assessment is based on the knowledge of the bank's employees.
Moreover, the latter involves regular contacts with clients: personal interviews with clients, regular visits to their enterprises, etc.

During a personal interview with the leaders of small enterprises, the goals of the courts, the sources and terms of repayment of debts should be clarified. Customers must prove that the inventories they credit will decrease by a specific date, the credited costs will be written off to the cost of all products sold.

There is another feature of small businesses. Often, their managers and employees are members of their families or relatives; their personal capital is often mixed with the capital of the enterprise. And when assessing the creditworthiness of small customers, the financial position of the owner is taken into account, which is determined according to their personal financial report.

The elements that make up the system for assessing the creditworthiness of small borrowers by the bank:

Business risk assessment;
interviews of the banker with the owners of the enterprise;
monitoring the work of this client;
analysis of the financial position of the enterprise and the client himself.

Assessment of creditworthiness of individuals

The assessment of the creditworthiness of individuals is carried out on the ratio of personal income and the requested, general, assessment of his financial situation and the value of all his property, personal characteristics, family composition, and the study of credit history.

There are 3 main methods for assessing the creditworthiness of individuals:

Study of credit history;
- scoring assessment;
- assessment of a person by financial indicators of his solvency.

Creditworthiness of a commercial bank client- the ability of the borrower to fully and on time pay off its debt obligations (principal and interest). The level of creditworthiness of the client indicates the degree of individual risk of the bank associated with the issuance of a particular loan to a particular borrower.

Assessment methods:

1. Financial coefficients for assessing the creditworthiness of clients of a commercial bank. In world and Russian banking practice, various financial ratios are used to assess the borrower's creditworthiness. Their choice is determined by the characteristics of the bank's clientele, possible causes of financial difficulties, and the bank's credit policy. All coefficients used can be divided into five groups: liquidity ratios; efficiency ratios, or turnover; financial leverage ratios; profitability ratios; debt service ratios.

By letter of the Central Bank of July 30, 1999, No. 223-T, it is recommended that the analysis of the financial condition of the borrower be carried out in acc. with the order of the Federal Office for Insolvency (Bankruptcy) No. 31-R dated 12.08.94. According to this document, the system of criteria for determining the unsatisfactory structure of the balance of insolvent p / p-th is based on the following indicators: current liquidity ratio and equity ratio.

Current liquidity ratio (K1) characterizes general security of working capital for conducting economic activities and timely repayment of urgent obligations. Determined by the following formula: K1 \u003d II / (V - p. 640 - 650 - 660), where II, V are the results of the corresponding sections of the balance sheet. (in other words, the ratio shows the ratio of working capital to borrowed funds)

Equity ratio (K2) characterizes the presence of own obs in p / p, necessary for its financial stability. K2 = (III - I) / II. This coefficient is the ratio of own ObS p / p and all ObS.

The basis for recognizing the structure of the balance sheet as unsatisfactory, and p / p - insolvent is the fulfillment of at least one of the following conditions: 1) K1 at the end of the reporting period matters< 2; 2) К2 на конец отчетного периода имеет значение < 0,1.

2. Cash flow analysis as a way to assess the borrower's creditworthiness. Cash flow analysis is a method for assessing the creditworthiness of a commercial bank client, which is based on the use of actual indicators characterizing the client's funds turnover in the reporting period. Cash flow analysis consists in comparing the outflow and inflow of funds from the borrower for a period that usually corresponds to the term of the requested loan. 3. Business risk analysis as a way to assess the client's creditworthiness. Business risk is the risk that the borrower's funds may not be completed on time and with the intended effect. Business risk factors are various reasons that lead to discontinuity or delay in the circulation of funds at certain stages.

Application of new banking products and services.

New banking service is a professional intellectual product created on the basis of marketing research of market needs in order to sell and make a profit. According to the economic content, innovations in the banking sector are divided into 2 types: technological and product. Technological innovations include, first of all, electronic funds transfer. Product products include new banking products that can be associated with both new operations and services, as well as traditional ones.

All innovations can be divided into 2 groups:

v network, which pass only with the help of wide area networks;

v off-network, which include payments with plastic cards through ATMs, POS terminals and other devices.

To network innovations include electronic payments via the Internet, information services and Internet trading, as well as home service via telephone.

Information services include the provision of general reference information of a financial nature (exchange rates, the situation on the financial market), the provision of operational information on the state of the client's account, as well as the possibility of exchanging electronic messages with the bank. These services do not bring direct benefits to the bank, but they save time for the client, simplify and improve the quality of service, and also increase the attractiveness of the bank for clients. Internet trading is a service that allows you to conclude various transactions via the Internet.

Offline innovations.

plastic card is a universal means of payment that allows its owner to pay for goods and services in a non-cash way, as well as to store and transport their money more securely

Bank plastic cards differ in their purpose, functional and technical characteristics. By appointment cards are divided into two enlarged categories: credit; debit.

Credit card allows the owner to have a constantly renewable loan in the issuing bank, and each issuing bank establishes its own rules governing its relationship with the client.

Debit cards can also be called payment cards. The client deposits a certain amount to his bank account, from which the issuing bank transfers funds to pay for various expenses.

According to specifications plastic cards are divided into: ordinary; magnetic; microprocessor.

Ordinary plastic card- a simple card with a fixed purchasing power, on its front side there is an index (surname) of the manufacturer with its trade mark, the name of the owner and his identification code, on the reverse side there may be a signature of the owner.

Magnetic cards on the reverse side they have a magnetic strip that can store 100 bytes of information. Before issuing such a card to the owner, the following is indicated on its surface: Full name. customer, his bank account number, expiration date of the card, i.e. the date of opening and expiration of the card.

Microprocessor cards- These are cards with a built-in silicon chip. The memory capacity of such cards does not exceed 256 bytes on average. Instead of a magnetic stripe, they have a built-in microprocessor containing random (for use in processing) and permanent (for storing immutable data) memory, as well as a data security system. The memory contains information about the owner of the card, about his bank account, information about the last 200 transactions with the client's account using this card. Such cards are divided into the following types according to their technical characteristics:

Ordinary memory cards that do not have a magnetic strip, but have a built-in microcircuit containing memory and a device for writing or reading information. The most widespread in the world are telephone memory cards. These cards are used in contact mode, i.e. the microcircuit is in physical contact with the contacts of the reader;

Smart cards are cards containing a "computer logic" chip. It can exchange information with the central computer, receive the necessary information from the bank, store information about previous transactions, make payments for a limited amount without contacting the issuer (the card is "charged" for this amount).

The most common application of smart cards is their use as "electronic" wallets, or super-smart cards (combine debit and credit cards).

Super-smart cards allow you to store a certain amount in your memory, which you can spend without any authorization, it is necessary only when the "virtual" money is over and the card needs to be "charged" with new ones through terminals such as ATMs. One of the most famous firms in this area is Mondex. Electronic money from this wallet can be transferred via communication channels, i.e. “fast” payments are possible between entities located in different parts of the globe. The Mondex card is a five-purse microprocessor card; for crediting funds to it, special devices are used - compatible phones. Ordinary telephone lines serve as channels for transferring money. Thus, phones can dispense electronic money like a kind of ATM. These systems will allow you to lend or borrow money if the transaction is between two client-users. The Mondex card differs from the traditional card in the presence of a special case, which looks like a calculator-book. The case is designed so that on one side there is a slot for the card itself, and on the other side there is a display and a miniature keyboard. Each card has its own password entered by the user.

Factoring(Assignment to the library of unpaid debt claims arising between counterparties in the process of selling products, issuing work, rendering services. It is a kind of trade and commission transaction combined with lending).

Leasing(Provision on a long-term lease of machines, equipment, real estate, and other elements of the main capital to direct tenants. 3 parties are involved: the lessor (own property - the bank or leasing company), lessee (user of property), supplier (seller of property).

Irina Dmitrievna Mamonova Corresponding Member of the Russian Academy of Natural Sciences, Doctor of Economics, Professor
© Elitarium - Distance Education Center.

The creditworthiness of a commercial bank client is the ability of the borrower to fully and on time pay off his debt obligations (principal and interest). Unlike its solvency, it does not fix non-payments for the past period or for some date, but predicts the ability to repay the debt in the short term. The level of creditworthiness of the client determines the degree of risk of the bank associated with the issuance of a loan to a particular borrower.

Client Credit Criteria

World and domestic banking practice has made it possible to identify the criteria for assessing the credit risk and creditworthiness of the client:

• the nature of the client;
• ability to borrow funds;
• the ability to earn funds to pay off the debt (financial capacity);
• capital;
• securing a loan;
• the conditions under which the credit operation is performed;
• control (legislative basis for the borrower's activity, compliance of the nature of the loan with the standards of the bank and supervisory authorities).

The character of the client is understood as his reputation as a legal entity, the degree of responsibility for repaying the debt, the clarity of his understanding of the purpose of the loan, the compliance of this purpose with the bank's credit policy.

The ability to borrow funds means that the client has the right to apply for a loan, sign a loan agreement or negotiate, the legal capacity of the borrower - an individual.

The ability to earn funds to repay the debt in the course of current activities is determined by the liquidity of the balance sheet, the profitability of the borrower, his cash flows.

For such a criterion of creditworthiness of the client as capital, two aspects of the assessment are most important: capital adequacy (analyzed on the basis of requirements for the minimum level of capital and financial leverage ratios); the degree of investment of own capital in the credited operation (indicates the distribution of risk between the bank and the borrower).

Loan collateral is understood as the value of the borrower's assets and a specific secondary source of debt repayment (pledge, guarantee, guarantee, insurance) provided for in the loan agreement. If the ratio of the value of assets and debt obligations is important for repaying a loan from a bank in the event that a borrower is declared bankrupt, then the quality of a particular secondary source guarantees that the borrower will fulfill his obligations on time in case of financial difficulties.

The conditions under which a credit operation is carried out (current or forecast economic situation in the country, region and industry, political factors) determine the degree of the bank's external risk.

The last criterion is control, i.e., the legislative basis for the borrower's activities, the compliance of the nature of the loan with the standards of the bank and supervisory authorities.

Methods for assessing the creditworthiness of a bank client are:

• management assessment;
• assessment of the financial stability of the client;
• cash flow analysis;
• collecting information about the client;
• monitoring the work of the client by going to the place.

The specificity of assessing the creditworthiness of legal entities and individuals, large, medium and small customers determines the combination of assessment methods used.

The assessment of the creditworthiness of large and medium-sized enterprises is based on balance sheet data, income statement, loan application, information about the history of the client and his managers. The system of financial ratios, analysis of cash flow, business risk and management are used as methods for assessing creditworthiness.

Financial ratios for assessing the creditworthiness of commercial bank customers

The choice of financial ratios is determined by the characteristics of the bank's clientele, possible causes of financial difficulties, and the bank's credit policy. Five groups of coefficients can be distinguished:

I - liquidity;
II - efficiency, or turnover;
III - financial leverage;
IV - profitability;
V - debt service.

The current liquidity ratio (K TL) shows whether the borrower is able to pay off debt obligations:

K TL = Current assets / Current liabilities.

The current liquidity ratio involves a comparison of current assets, i.e. funds that the client has in various forms (cash, net receivables of the nearest maturity, the value of inventories of inventory and other assets), with current liabilities, i.e. liabilities of the nearest maturity (loans, debt to suppliers, bills, budget, workers and employees). If the debt obligations exceed the funds of the client, the latter is insolvent.

Quick (operational) liquidity ratio (K BL) is calculated as follows:

K BL = Liquid assets / Current liabilities.

Liquid assets - that part of current liabilities that quickly turns into cash, ready to pay off debt. Liquid assets in the world banking practice include cash and receivables, in Russian practice - and part of quickly sold reserves. With the help of the quick liquidity ratio, the ability of the borrower to quickly release funds from circulation to repay the bank's debt on time is predicted.

Efficiency (turnover) ratios complement liquidity ratios and make it possible to make the conclusion more justified. If liquidity ratios are growing due to an increase in receivables and the cost of inventories while slowing down their turnover, it is impossible to upgrade the borrower's creditworthiness. The efficiency ratios are calculated as follows.

Inventory turnover:

a) the duration of the turnover in days:

Average inventory balances in the period / One-day sales proceeds;

b) the number of revolutions in the period:

Sales proceeds for the period / Average inventory balances in the period.

Accounts receivable turnover in days:

Average debt balances in the period / One-day sales proceeds.

Turnover of fixed capital (fixed assets):

Sales proceeds / Average residual value of fixed assets in the period.

Asset turnover:

Sales proceeds / Average assets in the period.

Efficiency coefficients are analyzed in dynamics and compared with the coefficients of competing enterprises and with industry averages.

Financial leverage ratio characterizes the degree of provision of the borrower with own capital. The options for calculating this coefficient are different, but the economic meaning is the same: an assessment of the amount of equity and the degree of dependence of the client on attracted resources. When calculating this ratio, all debt obligations of the bank's client are taken into account, regardless of their terms. The higher the share of borrowed funds (short-term and long-term), the lower the client's creditworthiness class. The final conclusion is made taking into account the dynamics of profitability ratios.

profit ratios characterize the efficiency of the use of all capital, including its attracted part. Their varieties are as follows.

Rate of return ratios:

a) Gross profit before interest and taxes / Sales proceeds or net sales;

b) Net operating income (profit after interest but before tax) / Sales proceeds or net sales;

c) Net income after interest and taxes / Sales proceeds or net sales.

Profitability ratios:

a) Earnings before interest and taxes / Assets or equity;

b) Earnings after interest but before taxes / Assets or equity;

c) Net income (earnings after interest and taxes) / Assets or equity.

A comparison of three types of profitability ratios shows the degree of influence of interest and taxes on the profitability of an enterprise.

EPS ratios:

a) earnings per share:

Dividends on ordinary shares / Average number of ordinary shares;

b) dividend income (%):

Annual dividend per share x 100 / Average market price per share.

If the share of profit in sales proceeds grows, profitability of assets or capital increases, then it is possible not to lower the client's rating even if the financial leverage ratio deteriorates.

Debt service ratios (market ratios) show how much of the profit is absorbed by interest and fixed payments. Their total amount is calculated as follows.

Interest coverage ratio:

Profit for the period / Interest payments for the period.

Fixed payment coverage ratio:

Profit for the period / (Interest + Leasing payments + Dividends on preferred shares + Other fixed payments).

The methodology for determining the numerator of the interest coverage and fixed payment coverage ratios depends on whether interest or fixed payments are included in the cost price or paid out of profit.

Debt service ratios are of particular importance at high inflation rates, when the amount of interest paid may approach or exceed the principal debt of the client. The more profit is used to cover the interest paid and other fixed payments, the less it remains to repay debt obligations and cover risks, and the worse the client's creditworthiness.

Financial ratios for assessing creditworthiness are calculated on the basis of forecast values ​​for the planned period, average balances on balance sheets as of reporting dates. Indicators for the 1st number do not always reflect the real state of affairs. Therefore, in world practice, a system of coefficients is used, calculated on the basis of the results account (it contains the reporting indicators of turnover for the period). The initial turnover indicator is the sales proceeds.

Cash flow analysis as a way to assess creditworthiness

Cash flow analysis is a method for assessing the creditworthiness of a commercial bank client, which is based on the use of actual indicators characterizing the turnover of the client's funds in the reporting period. In this, it fundamentally differs from the method of assessing the creditworthiness of a client based on a system of financial ratios.

Cash flow analysis is a comparison of the outflow and inflow of the borrower over a period, usually corresponding to the term of the requested loan. When issuing a loan for a year, the cash flow analysis is carried out on an annual basis, for a period of up to 90 days - on a quarterly basis, etc.

The elements of the cash inflow for the period are:

1) profit received in the given period;
2) depreciation accrued for the period;
3) release of funds (from inventories, receivables, fixed assets, other assets);
4) increase in accounts payable;
5) growth of other liabilities;
6) increase in share capital;
7) issuance of new loans.

As elements of the outflow of funds, there are:

1) payment of taxes, interest, dividends, fines and penalties;
2) additional investments in stocks, receivables, other assets, fixed assets;
3) reduction of accounts payable;
4) decrease in other liabilities;
5) outflow of share capital;
6) repayment of loans.

The difference between the inflow and outflow of funds characterizes the amount of total cash flow. Changes in the size of inventories, receivables and payables, other assets and liabilities, fixed assets affect the total cash flow in different ways. To determine this effect, balances are compared for items of stocks, debtors, creditors, etc. at the beginning and end of the period. An increase in the balance of inventories, debtors and other assets during the period means an outflow of funds and is shown in the calculation with a “-” sign, and a decrease is an inflow of funds and is recorded with a “+” sign. The growth of creditors and other liabilities is considered as an inflow of funds ("+"), the decrease - as an outflow ("-").

In determining the inflow and outflow of funds due to changes in fixed assets, the growth or decrease in the value of their balance for the period and the results of the sale of part of the fixed assets during the period are taken into account. The excess of the selling price over the balance estimate is an inflow of funds, and the reverse situation is an outflow:

Inflow (outflow) of funds due to changes in the value of fixed assets = Cost of fixed assets at the end of the period - Cost of fixed assets at the beginning of the period + Results of the sale of fixed assets during the period.

For cash flow analysis, data are taken for at least three past years. A steady excess of inflows over outflows indicates the client's creditworthiness. Fluctuations in the value of the total cash flow, a short-term excess of the outflow over the inflow of funds indicates a lower level of creditworthiness of the client. The systematic excess of the outflow over the inflow of funds characterizes the client as insolvent. The average positive value of the total cash flow (the excess of inflow over outflow of funds) is used as the limit for issuing new loans. The specified excess shows in what amount the client can repay debt obligations for the period.

Based on the ratio of the value of the total cash flow and the amount of the client's debt obligations (cash flow ratio), its creditworthiness class is determined: class I - 0.75; class II - 0.30; class III - 0.25; class IV - 0.2; class V - 0.2; class VI - 0.15.

Small business credit rating

The creditworthiness of small businesses is also assessed based on financial credit ratios, cash flow analysis and business risk assessment.

The bank's use of financial ratios and the cash flow analysis method is difficult due to the state of accounting and reporting for these bank customers. Small businesses typically do not have a licensed accountant. Audit costs for these bank clients are not available, there is no audit confirmation of the borrower's report, and therefore the assessment of the client's creditworthiness is based not on its financial statements, but on the bank employee's knowledge of this business. The latter involves constant contact with the client: a personal interview with him, regular visits to the enterprise.

In the course of a personal interview with the head of a small enterprise, the purpose of the loan, the source and the repayment period of the debt are clarified. The client must prove that the credited inventory will decrease by a certain date, and the credited costs will be written off to the cost of goods sold.

Another feature of small enterprises: their managers and employees are often members of the same family or relatives; the personal capital of the owner is often mixed with the capital of the enterprise. When assessing the creditworthiness of a small client, the financial position of the owner is taken into account, determined from the data of the personal financial report.

The system for assessing the creditworthiness of small borrowers by a bank consists of the following elements:

• business risk assessment;
• monitoring the work of the client;
• banker's interviews with the owner of the enterprise;
• assessment of the personal financial situation of the owner;
• analysis of the financial position of the enterprise on the basis of primary documents.

Assessment of the creditworthiness of an individual

The assessment of the creditworthiness of an individual is based on the ratio of the requested loan and his personal income, the general assessment of the financial situation of the borrower and the value of his property, family composition, personal characteristics, the study of credit history. There are three main methods for assessing the creditworthiness of an individual:

1) scoring assessment;
2) study of credit history;
3) evaluation by financial indicators of solvency.

When scoring, a system of criteria and corresponding indicators of the borrower's ability to repay the principal and interest to the bank are determined, the indicators are evaluated in points within the maximum set by the bank, and the overall creditworthiness score. There are different models of scoring assessment of the creditworthiness of an individual.

In the model built on the evaluation of the system of individual indicators in points, the significance of the indicators of the creditworthiness of an individual is determined through differentiation of the level of the maximum score.

A model that groups information about the creditworthiness of an individual. For example, "Paris Credit" distinguishes three sections in the scoring assessment of the feasibility of issuing a consumer loan:

1) information on the loan;
2) customer data;
3) the financial situation of the client.

The creditworthiness class of an individual can be determined on the basis of a model containing a scale of points, which is built depending on the value of the creditworthiness indicator.

Depending on the class, the bank determines the scale of deadlines and the amount of the loan (% of the client's annual income).

In Russia, commercial banks use different models of scoring assessments of the creditworthiness of an individual. They are adapted to Russian conditions. When evaluating the scores of the system of individual indicators, at the first stage, a preliminary assessment of the possibility of issuing a loan is given, based on the data of the test-questionnaire of the client. Based on the results of filling out the test-questionnaire, the number of points scored by the borrower is determined and the protocol for evaluating the possibility of obtaining a loan is signed. If the sum of points is less than 30, the refusal to issue a loan is recorded in the protocol. With a score of more than 30, the risk is assessed more carefully in the second stage, taking into account additional facts.

Creditworthiness assessment based on the study of the credit history of an individual

In the US, the basis for assessing the creditworthiness of an individual is the study of his credit history associated with the purchase of goods on credit. The bank uses the information contained in the loan application: name, residential address, social security card number. Based on these parameters, they collect data from banks, credit card companies, home owners about non-payment cases, their duration, the method of debt repayment and make a credit history.

For banks to receive information about the credit history of an individual in Russia, a specialized bureau is being created at the initiative of commercial banks.

Assessment of the creditworthiness of an individual based on financial indicators of its solvency

Solvency indicators are based on data on the income of an individual and the degree of risk of losing this income. Sberbank of Russia, when issuing a one-time loan, calculates the solvency of an individual borrower on the basis of data on the average monthly income for the previous six months, which is determined from a salary certificate or a tax return. Income is reduced by mandatory payments and adjusted by a coefficient that is differentiated depending on the amount of income (from 0.3 to 0.6). The greater the income, the greater the adjustment.