Bank loans as a source of financing the investment activities of enterprises Bushueva Natalia Vladimirovna. Bank loan as a source of financing for an enterprise: problems and prospects Bank loan as a long-term source
Short description
Such an invention as a loan is the most incredible creation of man, of course, after money. If there were no credit, we would spend a lot of time on various kinds of satisfaction. human needs. The enterprise-borrower has the opportunity to increase its assets (resources) by attracting them additionally. Using a loan, absolutely anyone has the opportunity to expand their business or business, or speed up the opportunity to get into use things, objects, values as soon as possible, which he could receive only in the future if there was no loan.
INTRODUCTION
1 BANK CREDIT, ITS NEED AND ROLE IN THE ACTIVITIES OF THE ENTERPRISE
1.1 The essence of a bank loan, the need to attract it
2. ANALYSIS OF ATTRACTION AND USE OF BANK CREDIT BY THE ENTERPRISE.
2.1 Analysis of the effectiveness of the use of bank credit.
2.2 Problems of bank lending to economic entities and ways to solve them
2.3 Ways to improve the efficiency of using a bank loan by an enterprise
Conclusion
Attached files: 1 file
INTRODUCTION
1 BANK CREDIT, ITS NEED AND ROLE IN THE ACTIVITIES OF THE ENTERPRISE
1.1 The essence of a bank loan, the need to attract it
1.2 Assessment of the creditworthiness of the enterprise
2. ANALYSIS OF ATTRACTION AND USE OF BANK CREDIT BY THE ENTERPRISE.
2.1 Analysis of the effectiveness of the use of bank credit.
2.2 Problems of bank lending to economic entities and ways to solve them
2.3 Ways to improve the efficiency of using a bank loan by an enterprise
Conclusion
List of used literature
Applications
INTRODUCTION
Such an invention as a loan is the most incredible creation of man, of course, after money. If there were no credit, we would spend a lot of time satisfying all sorts of human needs. The enterprise-borrower has the opportunity to increase its assets (resources) by attracting them additionally. Using a loan, absolutely anyone has the opportunity to expand their business or business, or speed up the opportunity to get into use things, objects, values as soon as possible, which he could receive only in the future if there was no loan.
An enterprise always needs to develop very quickly when it has the opportunity to supply an attractive, competitive product or some cost-effective service to the market. Without extensive growth, it is almost impossible for an enterprise to take a leading position in the market. Therefore, those companies that, due to their distrust or simply for other reasons, do not use borrowed funds to develop their business, may simply lose time, and someone will take his position much faster. And as a result, when the delay in time for enterprises in the current economy is undesirable, the company loses its position and it becomes much more difficult for it to compete with another company or enterprise that has grown stronger and took advantage of the current situation in the economy and used all the opportunities for its growth.
Today, no matter how sad it may sound, most domestic companies still continue to rely on their own strength, without borrowing, when sometimes this is an excellent opportunity to increase the economic growth of the enterprise.
I would like to note that borrowed funds are primarily needed to finance small or growing enterprises, when growth rates lag behind the pace of self-resources, to develop new types of products, improve production, purchase some other type of business, etc. Borrowed funds are attracted to finance working capital due to such processes as inflation or due to insufficient own working capital.
Borrowed capital is all borrowed sources that together bring profit to the enterprise. One of the sources of the formation of borrowed capital is a bank loan, the problems of attracting and using which will be considered in this paper.
To date, the role of credits and loans has increased dramatically. Especially the role of loans loans is of great importance at the stage of formation of the enterprise, when the enterprise uses borrowed funds, investing them for the future, that is, pouring them into long-term investments, in order to create new property.
Short-term loans are needed by the company in order to accelerate the turnover of funds, help maintain an optimal level of working capital.
In the current conditions of the global financial crisis, enterprises must carefully choose the instruments for attracting borrowed capital and their parameters, that is, learn how to manage borrowed capital to solve tasks in difficult conditions. The relevance of my course work lies in the fact that it to some extent allows us to present a picture in which the effective management of borrowed capital in the capital structure of an enterprise can provide additional income to its business turnover, increase
profitability of the production process itself, increase the market value of the enterprise.
The purpose of my course work is to study the very concept of a bank loan, and consider the principle of financing an enterprise through a bank loan. In accordance with the goal, the following tasks of the course work were formulated:
To study the concept and essence of a bank loan, its necessity and role in the activities of an enterprise;
To study the creditworthiness of economic entities;
To study the concept of the effect of financial Leverage in the analysis of the effectiveness of the use of a bank loan;
Assess the creditworthiness of the enterprise based on the analysis of financial ratios;
To study the problems of using and ways to improve the efficiency of bank credit.
1 Bank loan, its necessity and role in the activities of the enterprise
1.1 The essence of a bank loan, the need to attract it
Bank credit is the main form of credit. This means that it is banks that most often provide their loans to entities in need of temporary financial assistance. This is a monetary form of a loan that occurs when transferring funds to debt on terms of urgency, repayment, payment. The circulation of funds allows you to mobilize temporarily released funds and at the same time redistribute them in favor of those who need them. This issuance is undertaken by the bank, as free cash is deposited in bank accounts, and the bank has information on how these resources can be used.
Bank credit 1 represents the movement of loan capital, provided by banks on loan for a fee for temporary use. It expresses the economic relations between creditors (banks) and lending entities (borrowers), which can be both legal entities and individuals. Legal entities of other states - non-residents of the Russian Federation use the same rules in relation to the loan and bear the same duties and responsibilities as legal entities of the Russian 2 Federation, unless otherwise provided by law.
A bank loan can operate within a national framework and in the form of an international loan. It is provided with the conclusion of a loan agreement for each borrower individually, in order to
the degree of risk of the credit transaction was minimal. Loan agreement -
this is a legal document regulating the relationship between the bank and the borrower 3 when issuing a loan, defining the mutual rights and obligations of the parties.
A bank loan can be direct or indirect. Direct credit relations (borrowing bank) are predominant. More limited use of indirect bank lending, ie. granting a loan to a borrower through an intermediary, for example, a trade organization, pawnshops, etc.
Within the form of a loan, types of loans are distinguished, which are formed depending on the characteristics of the object, the target direction of the loan, its term, the security of repayment and other features. So, for example, taking into account the timing of issuance, the following types of loans are distinguished:
Short-term,
medium-term,
Long-term;
Taking into account their direction by industry:
Credit investments in industry, agriculture, trade, construction, etc.;
Objects are distinguished:
Loans for costs associated with the creation and increase of current and non-current (long-term) assets;
consumer needs of the population.
Depending on the form of provision, there are one-time loans and loans issued under a credit line. From the point of view of the granting technique, it is possible to distinguish consortial, bill of exchange, pawnshop, acceptance, cash, non-cash, credit cards, etc. loans. According to the methods of repayment, loans are urgent, deferred, overdue, long-term repaid.
Credit is also the main source of satisfaction
huge demand for money. Even with a high level of profitability and self-financing, economic entities may not have enough own funds for current activities and investments. Loans are needed (for example) when:
- enterprise 5 is “in a breakthrough” because the sale of products failed for one reason or another.
- brought down by suppliers or buyers
- having difficulty paying wages employees, etc.
Thus, credit stimulates the development of productive forces, accelerates the formation of capital sources for expanding production based on the achievements of scientific and technological progress.
The subjects of credit 6 relations in the field of bank credit are enterprises and firms, the population, the state and the banks themselves. As you know, in a credit transaction, the subjects of credit relations always act as lenders and borrowers. Lenders are persons (legal and physical) who have provided their temporarily free funds at the disposal of the borrower for a certain period. The borrower is a party to credit relations that receives funds for use (on a loan) and is obliged to return them within the prescribed period. As for a bank loan, the subjects of credit transactions here necessarily act in two persons, i.e. as a lender and as a borrower. This is due 7 to the fact that banks work mainly on borrowed funds and, therefore, act as borrowers in relation to the owners of these funds.
Loans, performing the functions of a loan, have various forms and help to use the funds received more flexibly. The company can get a loan in the most convenient form for itself - directly
a loan, in the form of a bill of exchange, or by issuing bonds.
The necessity and possibility of a loan is determined by regularities
circulation and turnover of capital in the process of reproduction: in some places temporarily free funds are released, acting as a source of credit, in others there is a need for credit, for example, to expand production. Thus, credit contributes to economic growth: the lender receives payment for the loan, and the borrower increases and renews his productive assets.
1.2 Assessment of the creditworthiness of the enterprise
Creditworthiness should be understood as such a financial and economic condition of the enterprise, which gives confidence in the effective use of borrowed funds, the ability and willingness of the borrower to repay the loan in accordance with the terms of the contract. In other words, the creditworthiness of the borrower is the ability to repay the loan debt. Its score of 8 is the bank's assessment of the borrower in terms of the possibility and expediency of granting him a loan. It determines the probability of its timely return and payment of interest on it.
Unlike solvency, creditworthiness 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. In addition, creditworthiness shows financial strength and allows rating it to be assigned to the appropriate classes.
Factors affecting creditworthiness:
- The capacity of the client. This is the client's eligibility to receive a bank loan.
- Reputation of the borrower
- Asset ownership
- The position of the client in the market.
Creditworthiness assessment involves, first of all, the use of indicators that characterize the borrower's activities in terms of the possibility of repaying loan debt.
The most common methods for assessing the creditworthiness of a borrower in world practice include the "5 C Rules" 9 , where the criteria for selecting customers are indicated by words starting with the letter "C":
A more specific consideration of the indicators of the rules of the five "SI" is presented below:
1. The nature of the borrower. |
The reputation of the client, the degree of responsibility of the client (legal or private person) for debt repayment, the attitude of partners towards this client, the borrower's credit history, communication with the client to confirm his stability, moral qualities, collecting information about clients. |
2. Financial opportunities |
Analysis of the client's income and expenses, cash flow, the ability to repay the loan, data on current cash receipts, inventory and their sale, borrowing. |
3. Capital |
Determining the adequacy of own capital, its correlation with other items of assets and liabilities, determining the degree of investment of own capital in a credit operation. |
4. Security |
The presence of a ratio of the value of the borrower's assets and debt obligations to repay a bank loan, the presence of a specific secondary source of debt repayment (pledge, guarantee, guarantee, insurance), if the bank's client has insufficient cash flows. |
5. General economic conditions |
Taking into account the current or forecast situation in the country, region, industry, political factors, business climate, the presence of competition from other enterprises, the state of taxes, prices for raw materials, etc. |
Bank loan represents, on the one hand, a sum of money provided by the bank for a certain period and on certain conditions, and on the other hand, a certain technology for satisfying the financial need declared by the borrower. In the second case, a bank loan is an ordered set of interrelated organizational, technical, technological, informational, financial, legal and other procedures that constitute an integral regulation of the interaction of the bank in the person of its employees and divisions with the bank client regarding the provision of funds. It is carried out in the form of loans, accounting of bills and other forms. This form of funding is the most common.
Loan benefits:
the credit form of financing is more independent in the use of the funds received without any special conditions;
most often, a loan is offered by a bank serving a particular enterprise, so that the process of obtaining a loan becomes very operational.
To credit deficiencies may include the following:
the loan term in rare cases exceeds 3 years, which is unbearable for enterprises aimed at long-term profit;
to obtain a loan, an enterprise requires the provision of collateral, often equivalent to the amount of the loan itself;
in some cases, banks offer to open a current account as one of the conditions for bank lending, which is not always beneficial for the enterprise;
With this form of financing, an enterprise can use the standard depreciation scheme for purchased equipment, which obliges to pay property tax during the entire period of use.
34. Financial leasing as a source of enterprise financing
Leasing is a special complex form of entrepreneurial activity that allows one side - the lessee - to effectively update fixed assets, and the other - the lessor - to expand the boundaries of activities on mutually beneficial terms for both parties.
Advantages of leasing:
Leasing involves 100% lending and does not require immediate start of payments. When using a conventional loan to purchase property, the company must pay about 15% of the cost at its own expense.
Leasing allows an enterprise that does not have significant financial resources to start implementing a large project.
It is much easier for an enterprise to obtain a leasing contract than a loan, because The equipment itself serves as the collateral for the transaction..
When leasing, an enterprise can calculate the receipt of its income and work out with the lessor an appropriate financing scheme that is convenient for it. Repayment can be made from funds received from the sale of products that are produced on equipment leased. Additional opportunities open up for the enterprise to expand production capacity: payments under a leasing agreement are distributed over the entire term of the agreement and, thereby, are released additional funds to invest in other types of assets.
Leasing does not increase debt in the company's balance sheet and does not affect the ratio of own and borrowed funds, i.e. does not reduce the company's ability to obtain additional loans. It is very important that the equipment purchased under a leasing agreement may not be listed on the balance sheet of the lessee during the entire period of the agreement, which means that it does not increase assets, which exempts the enterprise from paying taxes on acquired fixed assets.
Leasing payments paid by the company are entirely included in production costs.. If the property received under leasing is taken into account on the balance sheet of the lessee, then the enterprise can receive benefits associated with the possibility of accelerated depreciation of the leased asset. Depreciation charges for such property may be charged on the basis of its value and norms approved in the prescribed manner, increased by a factor not exceeding 3.
Leasing companies unlike banks no deposit needed if this property or equipment is liquid in the secondary market.
Leasing allows an enterprise, on completely legal grounds, to minimize taxation, and also to attribute all expenses for equipment maintenance to the lessor.
Domestic funding involves the use of those financial resources, the sources of which are formed in the process of financial and economic activities of the organization. An example of such sources is net profit, depreciation, accounts payable, reserves for future expenses and payments, deferred income.
At external financing the funds coming into the organization from the outside world are used. Founders, citizens, the state, financial and credit organizations, non-financial organizations can be sources of external financing.
Grouping the financial resources of organizations by sources of their formation shown in the figure below.
The financial resources of the organization, unlike material and labor, are fungible and susceptible to inflation and devaluation.
At present, the actual problem for domestic industrial enterprises is the state of wear and tear of which has reached 70%. In this case, we are talking not only about physical, but also about moral wear and tear. There is a need to re-equip Russian enterprises with new high-tech equipment. At the same time, it is important to choose the source of financing for this re-equipment.
The following sources of funding are distinguished:
- Internal sources of the enterprise(net profit, depreciation, sale or lease of unused assets).
- Involved funds(foreign investment).
- Borrowed funds( , bills).
- mixed(complex, combined) financing.
Internal sources of financing of the enterprise
Involved funds
When choosing a foreign investor as a source of financing, an enterprise should take into account the fact that the investor is interested in high profits, the company itself and its share of ownership in it. The higher the share of foreign investment, the less control remains with the owner of the enterprise.
Remains debt financing, at which there is a choice between and . Most often, in practice, the effectiveness of leasing is determined by comparing it with a bank loan, which is not entirely correct, because each specific transaction has to take into account its own specific conditions.
Credit as a source of financing for an enterprise
- a loan in cash or commodity form, provided by the lender to the borrower on a repayment basis, most often with the payment of interest by the borrower for using the loan. This form of funding is the most common.
Loan benefits:
- the credit form of financing is more independent in the use of the funds received without any special conditions;
- most often, a loan is offered by a bank serving a particular enterprise, so that the process of obtaining a loan becomes very operational.
The disadvantages of a loan include the following:
- the loan term in rare cases exceeds 3 years, which is unbearable for enterprises aimed at long-term profit;
- to obtain a loan, an enterprise requires the provision of collateral, often equivalent to the amount of the loan itself;
- in some cases, banks offer to open a current account as one of the conditions for bank lending, which is not always beneficial for the enterprise;
- With this form of financing, an enterprise can use the standard depreciation scheme for purchased equipment, which obliges to pay property tax during the entire period of use.
Leasing as a source of enterprise financing
is a special complex form of entrepreneurial activity that allows one side - the lessee - to effectively update fixed assets, and the other - the lessor - to expand the boundaries of activities on mutually beneficial terms for both parties.
Advantages of leasing:
- Leasing involves 100% lending and does not require immediate start of payments. When using a conventional loan to purchase property, the company must pay about 15% of the cost at its own expense.
- Leasing allows an enterprise that does not have significant financial resources to start implementing a large project.
It is much easier for an enterprise to obtain a leasing contract than a loan, because The equipment itself serves as the collateral for the transaction..
A leasing agreement is more flexible than a loan. A loan always involves a limited size and repayment period. When leasing, an enterprise can calculate the receipt of its income and work out with the lessor an appropriate financing scheme that is convenient for it. Repayment can be made from funds received from the sale of products that are produced on equipment leased. Additional opportunities open up for the enterprise to expand production capacity: payments under a leasing agreement are distributed over the entire term of the agreement and, thereby, additional funds are released for investment in other types of assets.
Leasing does not increase debt in the company's balance sheet and does not affect the ratio of own and borrowed funds, i.e. does not reduce the company's ability to obtain additional loans. It is very important that the equipment purchased under a leasing agreement may not be listed on the balance sheet of the lessee during the entire period of the agreement, which means that it does not increase assets, which exempts the enterprise from paying taxes on acquired fixed assets.
The Russian Federation retained the right to choose the balance sheet of property received (transferred) under financial lease on the balance sheet of the lessor or lessee. The initial cost of the property that is the subject of leasing is the amount of the lessor's expenses for its acquisition. In addition, since 2002, regardless of the chosen method of accounting for property that is the subject of a leasing agreement (on the balance sheet of the lessor or lessee), lease payments reduce the taxable base (Article 264 of the Tax Code of the Russian Federation). Article 269 of the Tax Code of the Russian Federation introduced a restriction on the amount of interest on loans that the lessor can attribute to a decrease in the tax base, but in other cases the lessor can attribute the amount of interest on a loan to a decrease in the tax base.
Leasing payments paid by the company wholly related to production. If the property received under leasing is taken into account on the balance sheet of the lessee, then the enterprise can receive benefits associated with the possibility of accelerated depreciation of the leased asset. Depreciation charges for such property may be charged on the basis of its value and norms approved in the prescribed manner, increased by a factor not exceeding 3.
Leasing companies unlike banks no deposit needed if this property or equipment is liquid in the secondary market.
Leasing allows an enterprise, on completely legal grounds, to minimize taxation, and also to attribute all expenses for equipment maintenance to the lessor.
Federal Agency for Education of the Russian Federation
Novosibirsk State University
Economics and Management
Department of Management
Course work
discipline: Corporate financial policy
on the topic: Bank credit as a source of financing for an enterprise: problems and prospects
Novosibirsk 2010
bank loan expense financing
Introduction
Theoretical part
Practical part
Conclusion
Bibliography
Introduction
This course work consists of two parts. In the first, theoretical one, a bank loan was considered as a source of financing for the activities of an enterprise. The types of bank loans, terms of repayment, principles, conditions of lending were considered.
In the practical part, 4 stages of financial analysis were sequentially performed: analysis of the company's internal environment; determination of the company's strategic financial position, choice of financial strategy and policy; determination of the optimal structure and price of capital; investment management. After carrying out these analyzes, the results were obtained, with the help of which it is possible to judge the current financial situation in the enterprise.
Theoretical part
The essence of a bank loan as a financial instrument in the activities of an enterprise
A bank loan is one of the most common forms of credit relations in the economy, the object of which is the process of transferring funds to a loan on terms of urgency, repayment, and payment.
A bank loan expresses economic relations between lenders (banks) and lending entities (borrowers), which can be both legal entities and individuals. Legal entities of other states - non-residents of the Republic of Kazakhstan use the same rules with regard to credit and bear the same duties and responsibilities as legal entities of the Republic of Kazakhstan, unless otherwise provided by law.
The bank form of credit is the most common form, since it is banks that most often provide loans to entities in need of temporary financial assistance.
A bank loan is provided exclusively by financial institutions licensed to carry out such operations.
The main principles of lending, including banking, which must be observed in the process of issuing and repaying loans, are:
) the urgency of the return;
) security;
) target character;
) payment.
The urgency of the return implies the return of the issued loan in the established volumes and within the specified period.
The security of the loan links its issuance and repayment with material processes that guarantee the return of the funds provided. Collateral must be liquid and complete. Even when a bank provides a loan on trust (blank loan), it must have absolute confidence that the loan will be repaid in a timely manner. Unsecured loans can be provided in large sums only to large enterprises, i.e. first-class borrowers with qualified management and an excellent history of development.
The target nature of the loan provides for the issuance and repayment of the loan in accordance with the goals stated at the conclusion of the loan transaction, for example, a loan to replenish the fixed capital.
The payment of the loan determines the payment for its use, in particular in the form of loan interest.
Lending conditions are understood as the requirements that apply to certain (basic) elements of lending: subjects, objects and loan collateral. In other words, the bank cannot lend to any client and that the object of lending can only be the need of the borrower, which is associated with his temporary payment difficulties, with the need to develop production and circulation of the product.
The terms of the loan are as follows:
) the coincidence of interests of both parties to the credit transaction;
) the availability, both of the creditor bank and the borrower, of the ability to fulfill their obligations;
) the possibility of realizing the pledge and the availability of guarantees;
) ensuring the commercial interests of the bank;
) conclusion of a loan agreement.
A bank loan is classified according to a number of criteria:
) By maturity:
Short-term loans are provided to fill the temporary shortage of the borrower's own working capital. Up to a year. The interest rate on these loans is inversely proportional to the maturity of the loan. Short-term credit serves the sphere of circulation. The most actively used short-term loans in the stock market, trade and services, in the mode of interbank lending.
Medium-term loans are provided for a period of one to three years for production and commercial purposes. The most widespread in the agricultural sector, as well as in lending to innovative processes with an average amount of required investment.
Long-term loans are used for investment purposes. They serve the movement of fixed assets, differing in large volumes of transferred credit resources. They are used for crediting reconstruction, technical re-equipment, new construction at enterprises of all spheres of activity. Long-term loans received special development in capital construction, the fuel and energy complex. The average repayment period is 3 to 5 years.
On-call loans that are repayable within a fixed period of time after formal notice from the lender (no maturity date originally specified). Currently, they are practically not used not only in Kazakhstan, but also in most other countries, as they require relatively stable conditions in the loan capital market and in the economy as a whole.
)By repayment methods:
Loans repaid in a lump sum by the borrower. This traditional form of repayment of short-term loans is optimal, because. does not require the use of a differentiated interest mechanism.
Loans repaid in installments over the entire term of the loan agreement. Specific conditions for the return are determined by the contract. Always used for long-term loans.
) According to the methods of collecting loan interest:
Loans, the interest on which is paid at the time of its total repayment. The traditional form of payment for short-term loans for a market economy, which has the most functional character from the standpoint of ease of calculation.
Loans, the interest on which is paid in equal installments by the borrower during the entire term of the loan agreement. The traditional form of payment for medium and long-term loans, which is quite differentiated depending on the agreement of the parties (for example, for long-term loans, interest payments can begin both at the end of the first year of using the loan, and after a longer period).
Loans, the interest on which is withheld by the bank at the time of the direct issuance of the loan to the borrower. For a developed market economy, this form is absolutely uncharacteristic and is used only by usurious capital.
) According to the methods of granting a loan:
Compensatory loans directed to the current account of the borrower to compensate the latter for his own expenses, including those of an advance nature.
Paid loans. In this case, loans are received directly to pay for settlement and monetary documents presented to the borrower for repayment.
) By lending methods:
One-time loans provided on time and for the amount stipulated in the agreement concluded by the parties.
A credit line is a legal obligation of the bank to the borrower to provide him with loans within a certain period of time within the agreed limit.
Credit lines are:
Revolving - this is a firm obligation of the bank to issue a loan to a client who is experiencing a temporary shortage of working capital. The borrower, having repaid part of the loan, can expect to receive a new loan within the established limit and the term of the agreement.
A seasonal line of credit is provided by a bank if the company periodically has working capital needs related to seasonal cyclicality or the need to stock up on stock.
An overdraft is a short-term loan that is provided by debiting the client's account in excess of the account balance. As a result, a debit balance is formed on the client's account. An overdraft is a negative balance on a client's current account. An overdraft may be permitted, i.e. previously agreed with the bank and unauthorized, when the client issues a check or payment document without having the bank's permission to do so. Overdraft interest is calculated daily on the outstanding balance, and the client pays only for the amounts actually used by him.
) By types of interest rates:
Loans with a fixed interest rate, which is set for the entire period of the loan and is not subject to revision. In this case, the borrower assumes the obligation to pay interest at a constant agreed rate for using the loan, regardless of changes in the market conditions for interest rates. Fixed interest rates apply for short-term loans.
Loans with a floating interest rate. Floating rates are called such rates, which are constantly changing depending on the situation in the credit and financial markets.
Loans with a stepped interest rate. These interest rates are reviewed periodically. Used during periods of high inflation.
) By the number of credits:
Loans provided by one bank
Syndicated loans provided by two or more lenders, united in a syndicate, to one borrower.
Parallel loans, in this case, each bank negotiates with the client separately, and then, after agreeing with the borrower on the terms of the transaction, a general agreement is concluded.
) By availability of collateral:
Contract credit. A checking loan is issued using a checking account, which is opened to customers with whom the bank has a long-term relationship of trust, companies with an exceptionally high credit reputation.
Pledge agreement. Pledge of property (movable and immovable) means that the creditor-mortgagee has the right to sell this property if the obligation secured by the pledge is not fulfilled. The pledge must ensure not only the repayment of the loan, but also the payment of the appropriate interest and penalties under the contract provided for in case of non-performance.
Surety agreement. Under this agreement, the guarantor is obliged to the creditor of another person (borrower, debtor) to be responsible for the fulfillment by the latter of his obligation. The borrower and the guarantor are liable to the creditor as solidary debtors.
Guarantee. This is a special type of surety agreement to secure an obligation between legal entities. Any financially stable legal entity can be a guarantor.
Credit risk insurance. The borrowing company enters into an insurance contract with the insurance company, which provides that in the event of default on the loan within the established period, the insurer pays to the bank that issued the loan compensation in the amount of 50 to 90% of the loan amount not repaid by the borrower, including interest for using the loan.
) By purpose of the loan:
Loans of a general nature, used by the borrower at his discretion to meet any need for financial resources. In modern conditions, they have limited use in the field of short-term lending; they are practically not used in medium and long-term lending.
Targeted loans that imply the need for the borrower to use the resources allocated by the bank solely for solving problems specified by the terms of the loan agreement (for example, paying for purchased goods, paying salaries to staff, capital development, etc.). Violation of these obligations entails the application to the borrower of the sanctions established by the agreement in the form of early withdrawal of the loan or an increase in the interest rate.
The above classification is considered to be traditional. In the Republic of Kazakhstan, there is a slightly different, more concise classification:
) according to the terms of submission:
short-term (up to 1 year);
medium-term (from 1 to 3 years);
long-term (over 3 years);
) by lending objects:
lending to replenish working capital;
lending for the renewal and acquisition of fixed capital;
) by lending methods:
balance lending;
turnover lending.
The need and possibility of attracting a bank loan is due to the patterns of circulation and turnover of capital in the process of reproduction: in some places temporarily free funds are released, acting as a source of credit, in others there is a need for a loan, for example, to expand production. Thus, credit contributes to economic growth: the lender receives payment for the loan, and the borrower increases and renews his productive assets.
The need to increase competitiveness increases the requirements for the quality of enterprise management. The growth of the level of management is unthinkable without the use of a formalized, scientifically based approach to making managerial decisions. Let's consider an example of a scientific approach to making a decision on attracting a bank loan to finance the current expenses of an enterprise.
The methodology for calculating the need to attract a bank loan to finance the current expenses of an enterprise is a logical procedure for assessing the feasibility of using a bank loan as an external financing tool.
The calculation of the need for a bank loan is based on the following basic conditions. First, the possibility of attracting credit resources is considered as one of the alternatives to eliminate the time gap between the inflow and outflow of funds. The decision to attract a loan is made subject to the greater economic feasibility of this method of external financing, in comparison with other available methods of covering the cash gap. Secondly, the planning system in the enterprise must support the simulation function. To select the optimal source of financing, it is important to be able to carry out a preliminary assessment of the consequences of making various decisions - in this case, when using certain methods of covering the cash gap.
The process of calculating the need to attract a bank loan to cover the time gap between the inflow and outflow of funds includes two stages: identification of the need for funds and analysis of the use of various alternatives to cover the identified deficit. Each stage is characterized by its task and content. The task of the first stage is to identify in advance the size of the cash deficit, the date of its occurrence, as well as the period of its persistence. The task of the second stage is to determine the most effective way cover the cash deficit. Consider the content of each stage.
The task of the first stage is implemented within the framework of the operational management of the enterprise based on the budgeting system - the technology of planning, accounting and control of funds and financial results. The budgeting system includes a hierarchy of financial plans that combines the main budgets (cash flow budget, income and expenditure budget, balance sheet budget) and operating budgets, activity budgets not related to core activities.
The hierarchy of budgets determines the direction of information flows: the main budgets are formed from the data provided by the budgets of a lower level: operating budgets, as well as budgets for investment and financial activities. In turn, the data necessary for the formation of operating budgets are formed on the basis of data from internal management accounting registers that record the parameters of business operations at the enterprise. The specified registers of internal management accounting are individual for each enterprise, the common thing for them is the reflection of changes in the parameters of the state of the enterprise under the influence of ongoing operations. As a rule, internal accounting registers include databases that record the state of enterprise resources, orders accepted for execution, specifications for various types of products manufactured by the enterprise, production programs, etc.
The information necessary to solve the problem of identifying the fact of a shortage of funds, its magnitude, duration is directly reflected in the cash flow statement. Cash flow statement - a financial document that presents in a systematic form at a given time interval the expected and actual values of receipts and disposals of funds of the enterprise. The cash flow statement shows the forecast values of the cash balance for a specific date and signals the planned need for additional resources. The data used as input to the cash flow statement is generated by the output of operating budgets. Operating budgets are estimates of planned and actual values of cash inflows and outflows, grouped according to the basis of the company's transactions of the same type. The specific breakdown depends on the specifics of the enterprise, as an example, the following typology can be proposed: the budget of receipts and deductions (revenues from sales by product type, deductions in the form of direct costs for certain types of raw materials), budget for wage payments, budget for tax payments , the budget for supporting costs (deductions for fixed costs), the budget for financial activities, the budget for investment activities. Some of the information provided in operating budgets is permanent, i.e. does not depend on the business activity of the enterprise (fixed costs, part of wages, part of tax payments). The values of other articles directly depend on the operations performed by the enterprise. Limiting the consideration of the financial model of an enterprise at the level of budgets is inappropriate, since in order to solve the problems of “consider options for mobilizing funds” and “evaluate the effectiveness of the operation”, it is necessary to be able to carry out simulation modeling that allows you to play various options for making managerial decisions regarding the choice of option, consequences choice of which will be optimal. A method for calculating an enterprise's need for a bank loan, built on the principle of the possibility of maintaining a dialogue "what will happen if?" should take into account the peculiarities of the formation of operating budgets, the content of which depends on the parameters of the functioning of the enterprise, recorded in the system of registers of internal management accounting.
After identifying the size of the cash deficit, the date of its formation and the period of operation, it is necessary to take measures to eliminate it. First of all, the cause of the deficit is clarified, the first option to cover the deficit may be the elimination of its cause. All available alternatives can be conditionally divided into three groups. The first group includes various options for modifying the structure of cash flows associated with changing the schedules of planned payments (consideration of options for delaying payments, possibilities for reducing the period of planned cash receipts). The second group includes options for making changes to production program enterprises in order to postpone the production schedule in time, requiring an outflow of funds (purchase of raw materials, components). The third group of ways to cover the shortage of funds includes instruments for attracting external financing, in particular a bank loan. Each option to cover the cash deficit has individual characteristics associated with the nature of the consequences caused by the use of this option. For example, the use of a bank loan is characterized by the need to pay the loan amount and interest on it by a certain date, the receipt of funds is expected no earlier than a certain date.
The choice of a specific method of covering the shortage of funds is carried out in two stages. At the first stage, methods are selected from the available alternatives, the expediency of which is confirmed by strategic calculations. For example, a request to counterparties to speed up settlements may reduce the level of trust in the enterprise, so it is not advisable to use them. At the second stage, the consequences of using each of the options are analyzed. The selection criterion is the financial condition of the enterprise, caused by the use of a specific method of covering the deficit. The consequences of any business transaction performed by the enterprise are reflected in its financial condition, which can be preliminarily assessed using a simulation system. Using the relationship “internal accounting registers operating budgets main budgets: cash flow budget and budget of expenses and incomes”, we can analyze the consequences of choosing each option for covering the cash deficit, reflected in the structure of the cash flow statement and the structure of income and expenses. Taking into account the consequences of using each of the available alternatives will allow you to make the best choice.
Practical part
Analysis of the internal environment of the company
Table. Horizontal and vertical analyzes of the balance sheet
Balance sheet items For the beginning of the year At the end of the year Change Absol. meaning Relative value Absol. meaning Relative value At the end of the year For the beginning of the year 1. Nemater. assets 2. Main. avg. 3. Unmanufactured building 4. Income. investment. in nemat. prices 5. Long-term. fin. invest. 6. Delay tax assets TOTAL FOR SECTION I 43 65371 17062 4468 41 427 87412 100% 100% 100% 100% 100% 100% 100% 39 67352 55012 2307 1997 1018 127723 90,69% 103,03% 322,42% 51,63% 4870,7% 238,4% 146,11% 0,000165 0,25 0,065 0,017 0,000157 0,001638 0,33 0,000139 0,23 0,195 0,008 0,007 0,003 0,45 1. Stocks: including: 1.1. Raw materials and other analogous values 1.2. Goth. products 1.3. goods shipped 1.4. expenses for periods 1.5. other stocks 2. Tax on ext. purchase cost. values 3. Deb. task for more than 12 months. including: 3.1. Pok-li and customers 4. Deb. task less than 12 months 4.1. Pok-whether and customers 5. Short-term. investments 6. Den. media TOTAL FOR SECTION II BALANCE 87153 1617 77321 6489 1424 302 1125 - - 82653 60293
1920 370 173221 260633 100% 1,85% 88,71% 7,44% 1,63% 0,34% 100% - - 100% 72,9%
100% 100% 100% 100% 92271 3316 82021 4753 1320 861 403 3285 - 57147 48465 -
204 153310 281033 105,87% 205,07% 106,07% 73,24% 92,69% 285,09% 35,82
100% - 69,14% 80,38% - 55,1% 88,5% 107,82% 0,33 0,006 0,29 0,02 0,005 0,0011 0,0043 - - 0,31 0,23
0,0073 0,0014 0,66 0,32 0,011 0,29 0,016 0,004 0,003 0,0014 0,011 - 0,2
0,17 - 0,0007 0,54 1. Set capital 2. Add. capital 3. Reserve. capital including: 3.1. reserves, image vsoot-ii with the legislator 4. Undistributed. profit TOTAL FOR SECTION III 5062 28222 759 759 38081 72124 100% 100% 100% 100% 100% 100% 5062 28222 759 759 50034 84077 100% 100% 100% 100% 131,38% 116,57% 0,019 0,1 0,002 0,002 0,146 0,27 0,018 0,1 0,002 0,002 0,178 0,19 1. Loans and credits TOTAL FOR SECTION IV 1. Loans and credits 2. Credit. tasks, including: 2.1. Suppliers and contractors 2.2. task before the staff 2.3. in front of the state budget.fund 2.4. on taxes and fees 2.5. other creditors 3. Assignment to the participants for the payment of income TOTAL FOR SECTION V BALANCE 100% 100% 73,9% 1,19% 0,45% 1,82% 22,5% 100% 100% 100% 124092 53622 33413 453 121 6882 12753 21 177735 281033 98,45% 124,05% 104,54% 87,79% 61,7% 874,46% 130,5% 100%
105% 107,82% 0,48 0,16 0,12 0,00198 0,000752 0,003 0,037 0,00081 0,64 0,44 0,19 0,118 0,0016 0,0004 0,024 0,045 0,000075 0,632 1) Liquidity ratios Current liquidity ratio: Conclusion: This coefficient is below the norm, both for the previous period and the present one. Quick liquidity ratio: Conclusion: The quick liquidity ratio is below the norm. And with each time period it decreases, thus in the near future the company will not be able to fulfill its payment obligations, there will be problems with solvency. 2) Asset management ratios The turnover ratio of working capital and the duration of 1 turnover of working capital:
Conclusion: fixed assets are turned around 4.05 times a year. They make one revolution in an average of 89 days.
Inventory turnover ratio:
Conclusion: Stocks are circulated 6.4 times a year, that is, faster than working capital.
Accounts receivable turnover (DSO):
Conclusion: The company after the delivery of products expects the moment of payment 45 days, at the end of the year 26 days. return on assets ratio
Conclusion: One ruble invested in fixed assets at the beginning of the year is returned in the form of revenue of 10.1 rubles, at the end of the year - 12.2 rubles. The indicator is average.
Resource return coefficient:
Conclusion: One ruble invested in assets is returned in the form of 2.5 rubles. revenue, at the end of the year in the form of 2.9 rubles. Losses may occur.
3) Funding management ratios
Conclusion: Borrowed funds in the liabilities of the enterprise at the beginning of the year 72%, at the end - 70%. Borrowed capital is used too actively and on a large scale.
4) Profitability ratios
Return on sales ratio
Conclusion: In both cases, 1 ruble of revenue contains 1 kopeck of net profit. The rate is very low!
Return on assets ratio:
Conclusion: At the beginning and end of the year, there are 5 kopecks per ruble of assets. The low indicator is due to the fact that the company uses a large percentage of borrowed funds and this entails loan repayments and low net profit.
Return on equity ratio:
Conclusion: 1 ruble of equity at the beginning of the year accounts for 17 kopecks, and at the end of the year - 16 kopecks.
5) Bankruptcy prediction coefficients:
To recovery \u003d (1.02 + 6 / 12 (0.5-1.02)) / 2 \u003d 0.38
This indicator characterizes whether the enterprise will be able to restore its solvency within 6 months following the reporting one. Thus, the conclusion follows that the enterprise will not be able to do this.
K loss \u003d (1.02 + 3 / 12 (0.5-1.02)) / 2 \u003d 0.445
This ratio shows whether the company will not lose its solvency within 3 months after the reporting date. With this indicator, the enterprise may lose its solvency, since it is almost 2 times lower than the standard.
Altman's Z \u003d 1.2K w + 1.4K non-spread + 3.3K profitability + 0.6K coverage + K return
Conclusion: 4,655, that is, the possibility of bankruptcy is very low.
Type of financial stability:
∆ Own working capital (SOS) \u003d (Own funds - Non-current assets) \u003d 84077-67352-92271 \u003d -75546
∆ Own and long-term sources of stock formation = (Own working capital + long-term borrowed funds) = -75546+19221=-56325
∆ The total value of the main sources of inventory formation = (Own current assets + long-term and short-term borrowed funds) = -75546+196956=121410
Pre-crisis financial stability.
Balance sheet analysis
Fixed assets increased by 1981 thousand rubles. Most likely, new fixed assets were acquired.
Over the past year, intangible assets decreased by 10%, which leads to a decrease in the level of production profitability.
Work in progress rose by 31%, which means that new construction has been started.
The company has long-term financial investments. Per Last year they increased by 1,956 thousand rubles, it is possible that the free cash assets of the enterprise were invested in the authorized capital of other enterprises or directed to the acquisition of securities of other enterprises.
Stocks were increased, raw materials and materials were purchased. Finished products increased by 4,700 thousand rubles. Most likely, goods were shipped to the warehouse for further sale.
Long-term receivables appeared during the year and amounted to 3285 thousand rubles. In turn, short-term accounts receivable decreased by 25,506 thousand rubles. or moved to the long term.
Short-term financial investments were reduced to zero.
The balance sheet is growing. This can be seen from the vertical analysis of the balance sheet, since non-current assets account for 45.5% of the balance sheet. In the past period, the share of non-current assets was only 33.5% of the balance sheet.
Equity capital is 30% of the balance sheet. Thus, the mechanism of borrowed capital is used poorly.
Retained earnings increased by 31% compared to the previous year. That is, the managers of the company can direct these funds to provide accounts payable to other enterprises, they can also be directed to financial, investment, current investments.
Borrowed capital makes up 70% of financing sources and almost 90% of short-term ones. If we compare accounts payable and accounts receivable, then accounts payable are almost 4 times more than accounts receivable. In general, we can say that the balance is positive. All indicators are quite good. The balance sheet currency is growing, long-term liabilities remain at the same level. Management expenses have decreased compared to the previous period, which means that managers pay almost all of their profits to owners in the form of dividends. Determination of the strategic financial position of the company, the choice of financial strategy and policy
Table. SWOT analysis
Strong 1. The Zaltman coefficient is at a high level 2. New construction has begun 3. Capital productivity growth 4. There may be problems with solvency in the near future 5. Balance sheet growth 6. Pre-crisis financial stability 7. Fixed assets increase Neutral 1. Accounts receivable generally decreased 2. Additional capital remained the same 3. Non-current assets remained virtually unchanged Weak 1. Increase in gross profit 2. Increase in inventories 3. Decrease in receivables 4. 100% repayment of short-term financial investments 5. Increased debt on taxes and fees 6. Most of the capital is borrowed, the company does not risk its own funds. Opportunities 1. Attraction of borrowed capital 2. State support 3. Expansion of the sales market 4. Possibility of effective investment activity 5. Use of reserves in the secondary market 6. Changing the structure of debtors by expanding the sales market Threats 1. Continued economic crisis 2. Increasing inflation rates 3. Emergence of new competitors 4. Claims by creditors of our obligations 5. Threat of default by debtors 6-1 6-2 4-1 2-3 5-5 Conclusion: An aggressive or moderate strategy should be applied depending on the degree of threats - the recommended financial strategy. Corporate strategy - accelerated growth or limited growth. financial philosophy Financial philosophy can be formulated as follows: For successful development and the growth of the enterprise, economic stability is necessary. What can be achieved with effective financial planning, which involves the organization of the optimal structure of assets and liabilities and the effective management of the process of formation and use of funds. The goals of various levels should be coordinated. It is necessary to increase the attractiveness for investors and customers. It is necessary to increase the profitability of services and organize more efficient work on the formation and use of funds. home financial goal companies to maximize profits. Strategic financial goals: fulfillment of short-term obligations at a specified time; development of new markets for the company's products; effective regulation of receivables and payables; increasing the liquidity of working capital; maximizing the profitability of the company's assets; ensuring the financial stability of the company; formation of an optimal investment portfolio and a portfolio of financial assets. Control standards for financial activities: · Increasing the company's current liquidity ratio to 1.5, and quick liquidity to 0.8; · increase of profitability of sales up to 15%; · increasing the profitability of assets up to 18%; · Obtaining long-term loans in the amount of 60% of all loans. The financial policy is a direction of the organization's activity, focused on achieving industry average results with an average risk value. The company's financial environment is designed to provide the financial opportunity to implement its corporate development strategy, namely the strategy of limited growth. To do this, the company needs to achieve a balance between the limited growth of production activities and the required financial stability of the company. Determining the optimal structure and price of capital The effect of financial leverage R a \u003d 34074 / 281033 * 100 \u003d 12.12 L 10/90 \u003d (1-0.2) * (12.12-18%) * (28103.3 / 252929.7) \u003d 0.8 * (-5.88) * 0.11 \u003d -5, 79 L 20/80 \u003d (1-0.2) * (12.12-20%) * (56206.6 / 224826.4) \u003d 0.8 * (-7.88) * 0.25 \u003d -1.576 L 30/70 \u003d (1- 0.2) * (12.12- 21%) * (84309.9 / 196723.1) \u003d 0.8 * (-8.88) * 0.42 \u003d -3, 04 L 40/60 \u003d (1- 0.2) * (12.12- 23%) * (112413.2 / 168619.8) \u003d 0.8 * (-10.88) * 0.66 \u003d -5, eight L 50/50 \u003d (1- 0.2) * (12.12- 25) * 1 \u003d 0.8 * (-12.88) * 1 \u003d -10.304 L 60/40 \u003d (1-0.2) * (12.12-26%) * (168619.8 / 112413.2) \u003d 0.8 * (-13.88) * 1.5 \u003d -16, 65 L 70/30 \u003d (1- 0.2) * (12.12- 30%) * (196723.1 / 84309.9) \u003d 0.8 * (-17.88) * 2.33 \u003d -33, 3 L 80/20 \u003d (1- 0.2) * (12.12- 33%) * (224826.4 / 56206.6) \u003d 0.8 * (-20.88) * 4 \u003d -66.8 L 90/10 \u003d (1- 0.2) * (12.12- 34%) * (252929.7 / 28103.3) \u003d 0.8 * (-21.88) * 9 \u003d -246.15 Since the financial leverage turns out to be negative at any value, we will take the ratio of borrowed and own funds for calculation as 0:100, respectively. Leverage shows how many times net profit will grow if gross profit grows by 1. In a crisis, it is better to choose the minimum non-negative leverage. In this case, it is 0, with a capital structure of 0/100. At the moment, the company has 36.8% of its own funds and 63.2% of borrowed funds. Of the borrowed accounts payable is 19%, bank credit 50.9%, debt to participants for the payment of income - 0.075%. Of own authorized capital 1.8%, additional capital - 10%, reserve capital - 0.2% retained earnings 17.8%. Calculation of the price of borrowed capital 1. The cost of a bank loan
K o
The share of individual elements of capital in the total amount, share
The newly raised capital will be retained earnings.
Weighted average cost of capital:= 1*15.7=15.7
Breakpoint MCC = forecast. Emergency / forecast. SC=1600/1=1600
Chart of marginal price of capital of a firm
Investment management
Cash flows of projects (in thousand rubles)
Table
1. Payback period of projects РР1=350+300+350+200=1200 (4 years) РР2=200+250+150+250+150=1000 (5 years) РР3=350+200+140+110+150=950 (5 years) 2. Discounted payback period DPP1=(350/1.17)+(300/1.17^2)+(350/1.17^3)+(200/1.17^4)+ DDP2=(200/1.17)+(250/1.17^2)+(150/1.17^3)+(250/1.17^4)+(150/1.17^5)+ (550/1.17^6)+(400/1.17^7)+(300/1.17^8)=1082.177 (8 years old) DDP3=(350/1.17)+(200/1.17^2)+(140/1.17^3)+(110/1.17^4)+(150/1.17^5)+ (550/1.17^6)+(250/1.17^7)+(350/1.17^8)+(145/1.17^9)=1033.149393 (9 years old) 3. Net effect NPV1=(600/1.17^10)+(850/1.17^11)+(950/1.17^12)=420.3 (12 years old) NPV2=(600/1.17^9)+(700/1.17^10)+(800/1.17^11)=433.9 (11 years old) NPV3=(550/1.17^10)+(600/1.17^11)+(800/1.17^12)=342.6 (12 years old) 4. Accounting yield ARR1 =((4800-350)/12)/(350/12)=370.8/29.1=12.7 ARR2= ((5200-200)/11)/(200/11)=454.54/18.18=25 ARR3=((4195-350)/12)/(350/12)=320.4/29.1=11.01 5. Internal return Profitability index=(1200+420.3)/1200=1.35 Р2=(1000+433.9)/1000=1.43 Р3=(950+342.6)/950=1.36 Table of investment project evaluation results
Project Evaluation Criteria Most attractive project Attractive project Least Attractive Project Payback period Discounted payback period Accounting yield net reduced effect Internal return Profitability index In this term paper the topic of a bank loan as a source of financing for an enterprise would be considered. Within the framework of this topic, the possibility of obtaining this type of loan was presented. As a result, it was found that in the presence of financial and other opportunities, this is a good solution for the implementation of investment projects. Further, in the practical part, an assessment of the financial condition of the enterprise was carried out. But she did not give clear results. For example, with pre-crisis financial stability, the probability of bankruptcy is very low. With very low profitability, the company is still quite solvent. A moderate financial strategy was also chosen. At the next stage of the analysis, an assessment of the cost of equity and borrowed capital was carried out. As a result, it was determined that the newly attracted capital will be retained earnings. And at the final stage, three investment projects were considered and one of them, the most profitable, was selected.
Conclusion
As already discussed in the previous topic, the following can be used as sources of investment financing:
State budget allocations;
Own funds and on-farm reserves of investors;
Borrowed financial resources;
Attracted resources;
Monetary funds of business entities centralized by ministries, other government bodies and voluntary unions;
Monetary funds of the population;
Foreign investment.
Financing of investments can be carried out both from one and several sources, especially when implementing medium and large projects.
In addition to the above sources, financing of investment activities is also carried out through the use of special methods - leasing and forfeiting.
In countries with developed market economies, the main source of financing for long-term investments is the own funds of corporations and firms (over 60%). The missing amounts are replenished by issuing securities (shares and bonds) and a bank loan.
The Republic of Belarus, as a country with a transitional economy, is experiencing a large shortage of investment resources, especially budget allocations and investors' own funds. An undeveloped stock market does not provide a significant attraction of alternative sources of investment. The influx of foreign capital into the republic is insignificant. Under these conditions, a large-scale renewal of fixed production assets is impossible without the active use of bank credit.
In the current economic situation, the government and the National Bank of the Republic of Belarus are pursuing a policy aimed at stimulating the use of loans by enterprises to finance investments and enhancing the activities of banks in the field of long-term investment lending.
A bank loan has obvious Benefits before other funding sources:
Ø lending is often a more efficient and convenient method of obtaining the necessary funds than issuing shares and holding bonded loans;
Ø lending involves the relationship between the actual payback of capital investments and the return of the loan, requires the use of highly effective investment projects;
Ø The repayment and payment of the loan increase the responsibility of borrowers for compliance with the regulatory deadlines for the implementation of projects and the development of commissioned production capacities, the rational use of borrowed funds.
Today in the modern economy there is such a situation that the institutions of the banking sector have the greatest investment potential.
Advantages of the banking sector lies, first of all, in its exceptional position and in the unique opportunity to use funds in the form of credit emission, as well as in the ability to direct these funds through the existing channels of the credit system.
The investment activity of banks is making investments, as well as all necessary measures and actions to translate these investments into income or a positive effect of some kind (social, environmental, etc.).
purposeful activities of the bank to invest (invest) funds in securities, real estate (in relation to real estate, the bank acts as an owner, and not as a creditor), authorized funds of enterprises, precious metals and other investment objects, the market value of which can increase and bring income to the bank in the form of interest, dividends, profits from resale and other income.
Banking investments It is generally accepted to consider the investment of bank funds in securities for a long or long-term period of time in order to obtain explicit or indirect income.
Under explicit or direct income from investments it is customary to consider profit in the form of interest, dividends, etc. Indirect income is the strengthening and improvement of the bank's position, its image, etc. This is expressed in the form of ownership of a controlling stake in an organization, which, in turn, gives the bank control over the management of this organization.
Recipients An investment loan can be creditworthy legal entities and individuals, individual entrepreneurs.
Objects for the investment activities of banks are various securities, newly created or modernized objects of current or fixed assets, intellectual property objects, cash deposits, etc.
Main directions
investment-based lending
investment in securities, shares, etc.
allocation of funds allocated for investments (search in the structure of the bank's assets for free funds, both bank resources and depositors' resources, for their use in further investment activities).
When carrying out investment activities, the bank, as a rule, provides two types of services:
replenishes the volume of its cash by issuing securities (placing them on the stock market)
provides intermediary services to find a buyer or seller for a particular security. That is, it acts as a broker or dealer.
Each commercial bank, when carrying out investment activities, sets itself a whole set of main and secondary goals that are regulated by its investment strategy.
Basic goals investment activities of banks:
ensuring the safety of your own investments
ensuring an acceptable or planned level of return on own investments
maintaining the growth of own investments
maintaining a sufficient level of liquidity of own investments.
It is worth noting that the safety of investments is given more priority than their profitability and growth in the total volume. Optimal combination of safety and profitability is achieved by a clear and competent diversification of the bank's investment portfolio.
Achievement of the main goals is achieved through the implementation of secondary goals and objectives of the investment activities of a commercial bank.
indirect goals investment activities of banks:
maintaining the stability and safety of the bank's resources
increase and expansion of banking resources
investment portfolio diversification
monitoring and control over the number of assets that generate minimal income, or do not generate income at all. It should be noted that the presence of liquid assets that do not generate income in the short term is acceptable. This is done to ensure an acceptable level of liquidity of the bank's investment portfolio.
obtaining the necessary additional effects from the main investment objects in the form of expanding the sales market, increasing the client base and the number of transactions carried out, reducing banking costs, etc.
As a rule, any set of assets in which investments are made has a certain level of return and risk. From this point of view, the investment activity of the bank is regulated from the position maximizing income with existing risks, or minimization of all possible risks with the current rate of return.
Income from the investment activities of the bank are made up of
interest paid
increase in the value of the security in which the bank has invested
the amount of commission paid for the investment services provided by the bank.
Risks associated with the investment activities of commercial banks are not much different from the general investment risks, and are as follows:
business risks (risk of a decline in the overall economic and financial condition of the economy)
risks of early withdrawal bank deposit
liquidity risk
risks associated with lending (non-fulfillment of lending conditions: non-payment of interest on time, loan default, etc.)
the risk of changes in the exchange rate of securities in the bank's investment portfolio.
Forms of investment activity of commercial banks differ and are classified according to general concepts and criteria, namely:
forms of investment activity of commercial banks differ according to the objects of investment. These can be objects of the real (real estate, precious metals, jewelry, art objects, etc.) and financial (intellectual property, investment loans, deposits, etc.) sectors
forms of investment activity of commercial banks differ according to the purpose of the investment. The goal may be the need to manage the investment object, or the need to obtain the highest possible income.
forms of investment activity of commercial banks differ according to the purpose of investment. Investments can be directed to the development and expansion of the enterprise, or vice versa, investments not related to economic activity organizations
Investments aimed at the development of the enterprise can be of the following types:
investments related to improving the efficiency of banking activities (training of employees, technical modernization, improvement of working conditions, etc.)
investments aimed at increasing the offered banking services (increasing the number of banking operations, increasing the client base, launching new divisions, etc.)
investments related to the need to meet the requirements of the State Regulatory Authority.
forms of investment activity of commercial banks are distinguished according to the sources of their formation. Such funds can be own and borrowed.
forms of investment activity of commercial banks can be short-term (up to 1 year), medium-term (from one to three years), or long-term (over three years) character.
Favorable investment activity of commercial banks is when, as a result of all the costs incurred, the financial and general economic condition of the bank improves.
Resources for investment lending are:
Own funds of commercial banks;
Attracted funds of legal entities and individuals (net of those transferred to the mandatory reserves fund);
Centralized resources of the National Bank;
State centralized investment resources;
Received foreign loans.
To the main factors, affecting the scale of the bank's investment activities and the choice of investment policy, include:
The period of the bank's operation (the period of establishment, rapid growth, sustainable growth and prosperity, slow growth and gradual cessation of activities);
Market behavior strategies (conservative, moderate or aggressive);
Specialization of the bank, the size of the bank and the branching of the network of its branches;
The ability and willingness to make significant costs that do not bring profit in the near future, since investment operations require expensive and information support.
Along with the factors influencing the choice of investment policy and the scale of investment activities of banks, there are factors that limit this activity. These include:
Ø unfavorable investment climate, which makes investments unprofitable;
Ø the bank does not have significant excess liquidity, which is associated with the very nature of investments (transformation of short-term attracted resources into longer-term investments), as well as with huge risks and possible illiquidity of the investments themselves;
Ø Regulatory activities of the National Bank of the Republic of Belarus aimed at limiting risks (creating reserves for depreciation of securities).
Investment bank concept as a set of relations and activities in the securities market allows you to determine the main types of its activities: brokerage, depositary, clearing, securities management - that is, those types that make up the status of an investment bank.
Can be distinguished traits, characteristic of legal entities, called investment banks:
This is a large commercial organization that combines a large number of eligible activities in the securities market and in some other financial markets;
The main activity is to attract financial resources through securities;
Priority is given to medium and long-term investments;
The basis of the portfolio is securities, with the majority of them being non-government securities;
Transactions are carried out primarily in the wholesale financial markets.
In developed countries, investment banks provide their clients with the following main services:
§ attraction of resources;
§ business restructuring services through mergers and acquisitions;
§ brokerage services;
§ securities portfolio management services;
§ custody and custodial services;
essence attraction of resources is that when a bank client needs to receive financial resources for a long time (for the reconstruction of an enterprise, the development of a new type of business, the construction of a new enterprise), then the investment bank develops mechanisms and tools for attracting financial resources, looking for intermediaries and end investors.
The next type of service ( business restructuring through mergers and acquisitions of enterprises) for the Belarusian conditions is still less relevant than other services of investment banks. But in a developed market economy, enterprises and companies experience crisis situations related to the inconsistency of the size or structure of their company with market requirements, and in this case, capital owners can make decisions: a) to leave a particular market; b) on the connection of its capital with other capital; c) on the purchase of a competitor company or a company that produces the products they need.
Investment banks also provide ordinary brokerage services, that is, services for the purchase and sale of securities at the expense and on behalf of the client. In the Law of the Republic of Belarus "On Securities and Stock Exchanges" such transactions are called intermediary. They are carried out by almost all Belarusian banks, which are professional participants in the securities market.
An investment bank client who has a certain amount of free financial resources can place them on the financial market, do it on their own by contacting an investment bank as a broker and using its recommendations, or entrusting the placement and subsequent management of resources to an investment bank. In the latter case, there service for managing the client's financial resources. An investment bank does not just sell or buy securities and other financial assets on behalf of a client, but disposes of financial resources at its own discretion, with the goal of maximizing the client's income. The forms of such control are different.
The investment bank provides its clients with custody, guardianship, guarantee, and accounting services for clients' securities. Described in foreign literature custody services correspond to the term established in Russian "custody services". Custody activity is an activity on accounting, settlements, storage of securities, as well as on settlements, accrual and payment of income on securities.
Banks serving mainly state investment programs.
Belinvestbank Belpromstroybank Belagroprombank
Banks having special programs lending to investment projects of small and medium-sized businesses. Priorbank. Belgazprombank.
Commercial banks make long-term investments to statutory funds other legal entities, which may be: banks; enterprises; firms; non-bank credit and financial organizations; clearing centers; interbank information centers.
The source of investment is the free balance of profits and funds formed from profits (except for authorized and reserve funds).
In order to control the investment activities of banks (non-bank financial institutions) carried out at their own expense, the Rules for regulating the activities of banks and non-bank financial institutions establish the following standards:
Participation of the bank in the authorized capital of one legal entity;
The maximum size of participation in the statutory funds of all legal entities in the aggregate.
The total amount of funds invested in the statutory funds of other business entities of all types of activities should not exceed 25% of the bank's own funds (capital). The ratio of participation in the statutory fund of one legal entity should not exceed 5% of the bank's own funds.
Investments in the statutory funds of other banks may be carried out by a commercial bank only after agreement with the National Bank of the Republic of Belarus, regardless of its share of participation. If the share of the bank's investments in the authorized capital does not exceed 10% of the authorized capital of the enterprise, then such placements are carried out by banks independently with subsequent notification to the National Bank of the Republic of Belarus. When making investments in an amount exceeding the specified share of participation, the bank must obtain permission from the National Bank of the Republic of Belarus.
Considering that bank operations aimed at long-term investment in securities of other legal entities are associated with increased risk, banks are required to create appropriate reserves for the depreciation of their financial investments in the event of their continued depreciation. Banks should only make provisioning if the decline in value is long-term. The amounts of created reserves are determined separately for securities that have a market quotation and for securities that do not have a market quotation.
At present, the republic's banking system is experiencing a lack of long-term resources, which hinders the development of investment lending.
In order to concentrate and increase long-term resources, the National Bank has created a special investment fund formed at the expense of quarterly deductions from the profits of the National Bank, the amount of which is determined by the Board of Directors. The funds of this fund are used to maintain the resource base of commercial banks lending to highly effective investment projects (based on new and high technologies aimed at increasing the export potential, etc.), peasant (farmer) households in the period of their formation and development, as well as for investing to authorized funds of banks, investment, financial and credit institutions and other organizations in order to expand sources of credit resources.
The right to receive centralized resources of the National Bank are commercial banks that comply with established economic standards, meet reserve requirements, submit reports in a timely manner and do not have debts on loans.
It should be noted that the resources used significantly affect the organization of credit relations. When lending at the expense of its own and borrowed funds, a commercial bank independently selects a borrower and an investment project, forms the terms of a credit transaction without any intervention of state bodies in the selection and implementation of these conditions.
Investment loans provided in Belarusian rubles and foreign currency in compliance with the principles of bank lending: urgency and recurrence, target orientation, security and payment.
Issuance of a loan in foreign currency to legal entities is carried out for the implementation of highly effective, currency-paying investment projects and other economically beneficial measures that ensure the receipt of foreign exchange earnings.
The Bank carries out a thorough check of the received documents in form and substance, and also conducts a mandatory examination of the provided investment project in order to determine the conditions for issuing a loan and reduce the risk of its non-repayment.
Holding project expertise provides:
Characteristics of a potential borrower, analysis of its current financial condition, assessment of the main problems facing the enterprise in the implementation of the project, and its capabilities to solve them;
Economic analysis of the effectiveness of the investment project. Carrying out such an analysis allows us to assess the feasibility of investing in the project, its real efficiency and payback, the ability of the enterprise to pay off the loan and accrued interest in a timely manner.
Basic Documents used by the bank for economic analysis are:
Business plan;
Financial forms with a forecast of the enterprise's activities for the period of the project (forecast of profits and losses; cash flows, estimated sales, project costs; calculation of the terms of use and repayment of the loan and payment of interest);
Design and estimate documentation;
Contracts for the supply of equipment, construction and installation works, the sale of future products;
Conclusion of expert bodies, etc.
Based on the results of the examination, the bank draws up a written opinion on the submitted project, its payback and the feasibility of issuing an investment loan.
The conclusion also provides an assessment of the loan collateral offered by the client. Waysensureinvestment loan can be:
Pledge of property (including pledge of an object under construction, securities, cash),
Government and other bank guarantees,
Guarantees (guarantees) of third parties,
Other methods provided by the legislation of the Republic of Belarus or the loan agreement.
The borrower can simultaneously use several methods of securing credit obligations. Material security throughout the entire period of lending should be at least 1.3 times (for lending in foreign currency - 1.5 times) exceed the amount of the principal debt and interest due for the use of the loan.
In the competitive selection of projects for lending preference is given projects that ensure the production of competitive export products, duly classified as projects for the creation and development of industries based on new and high technologies, included in state targeted programs, having a shorter payback period and loan repayment period. Projects are also considered preferable, in which the company's own funds account for at least 20%, since this circumstance reduces the risk of the bank.
After the credit committee makes a positive decision on issuing a loan, the bank and the borrower conclude between themselves treaty, which stipulates the specific terms of the loan transaction:
The object of credit
Credit amount,
Currency and term of the loan,
The procedure for granting and repaying a loan,
Ways to secure credit obligations,
Interest rate,
Interest payment frequency
The bank's rights to early collection of the loan in case of misuse and increase in interest rates in case of non-compliance with other terms of the agreement.
Considering that an investment loan is provided, as a rule, for a long period, it is established floating interest rate, which is revised when the conditions that determine its value change (inflation rate, refinancing rate, exchange rate, increase in the degree of risk on a loan, etc.). Conditions and frequency of interest rate revision are stipulated in the loan agreement.
The maximum loan amount is determined based on from the estimated cost of the project being implemented, recalculated into current prices, and the amount of other sources (own, borrowed, public funds) allocated to finance the project.
Loans are issued most often in the form of an open credit line as soon as equipment, other material assets, construction and installation works are received for the project being implemented.
Loans are provided in non-cash form strictly in accordance with the terms of the loan agreement and are sent to the current account of the borrower or to the account of third parties (suppliers, contractors, etc.).
A long-term loan is provided for the implementation of investment projects with a payback period of does not exceed five years, and the repayment of the loan is ensured within six years from the date of issuance of the first loan amount. The deadline for using the loan is determined taking into account the standard period for the implementation of the project being financed and its payback period.
If there is real collateral for the loan and objective reasons that caused its untimely repayment (violation of work schedules, deadlines for putting objects into operation, production capacity development schedules) or suspension (for a certain period) of construction, the borrower can apply to the bank with a request to extend the repayment period loan.
The Bank has the right, as an exception, to prolong the outstanding amount of the debt. Prolongation is carried out for a period of not more than six months subject to credit deadlines.
For a positive decision on the issue of prolonging the loan, the borrower must have: real opportunities to repay the loan (measures to overcome the backlog during construction, ensure commissioning, development of capacities); sufficient security for the repayment of the loan and interest on it. The prolongation of the loan is formalized by the conclusion of an additional agreement to the loan agreement.
The bank accompanies the issued loan throughout the entire period of lending, in other words, it systematically control:
Over the course of the implementation of the investment project in accordance with the business plan, design estimates and concluded contracts, the development of the planned production capacities by the enterprise;
The intended use of the issued credit funds, the reliability of the volume of construction and installation works performed and the correctness of their payment;
Changes in the financial condition and creditworthiness of the borrower in order to take corrective actions aimed at minimizing losses associated with the risk of default on the loan and non-payment of interest;
The collateral for the loan.
In case of violations, the bank warns the borrower about the termination of further lending and, if its recommendations are not implemented within the agreed time frame, it applies sanctions provided for by the loan agreement or the legislation of the Republic of Belarus.
Redemption The investment loan starts after the completion of the project and the acceptance of the object into operation. The sources of repayment are the profit received from the implementation of the credit project, the profit from the overall results of the economic and financial activities of the enterprise and depreciation.
The terms and frequency of repayment of the loan are determined by agreement between the bank and the borrower, based on the standard payback of the project, the established deadline for using the loan, credit risk, the amount and frequency of receipt of proceeds from the sale of products to the current account of the borrower, and other factors, and are provided in the loan agreement.
In the case of lending to an investment project within the framework of state programs interest rates can be set below market if the bank has been provided with guarantees to compensate for losses associated with concessional lending at the expense of the state budget or targeted budget funds.