Every transaction needs a proper procedure to have a better output same as to commodity financing process and availing loan. It is necessary to determine the step by step procedure of commodity financing to avoid inappropriate circumstances in the future such as high ratio of past due.
The main stages of commodity financing process are outlined below for everyone’s clearer knowledge on how to avail such loan. We wish to give you a better understanding to this topic.
availing of Commodity Financing Process
The first step is filing of loan application issued by the lender. A set of application form will be given to the borrower which contains a set of information and the details on why the borrower is seeking for financing. The cash flow and proof identity of the borrower must be show also upon application.
Typically, financing is suitable for business purposes which is already active either domestic or internationally. Therefore, it is expected that lender may ask some form of record which shows your past revenue.
- Pre-evaluation of application
After filing the application form, the financier will undergo a full credit risk assessment of the documents that have been received. The financier will investigate the accuracy of all the information indicated in all the documents that is already in their custody.
The evaluation process commonly involve some type of credit scoring procedure which include also the vulnerability of the business they entered in the market, the possibility of default and the quality of management. This stage is commonly known as Credit Investigation or CI.
- Term Negotiation
The eligible borrower can negotiate term with the financier. Some of the terms that can be negotiated will be fixed charges, as well as interest rate. The approval depends of course to the decision of the officers of the financing company. Another term that can be negotiated is the longevity of the loan term which solely depends on the capability of the borrower to pay the said loan.
- Final Evaluation of application and documentation of loan
After an in-depth assessment and the approval of negotiation, the officers will finally decide if the application of the borrower is approve or decline.
At this stage, the financier will prepare the documents to be signed by the qualified borrower and gather all the requirements needed in the documentation of loan. Also, every detailed i will be put in the system for tracking record.
- Signing of documents and counselling
At this rate, the borrower will be counselled about the agreement of terms on her loan. The borrower has all the right to know even the smallest detail regarding her loan. Transparency is significant for both parties when it comes to sensitive transaction like lending.
Just after the counselling, the borrower is now going to sign all the legal documents presented to her as long as she understand what has been counselled to her.
The loan document is a legally signed contract by both parties which includes the amount, duration, interest rate, terms of payment and as well as what will happen in case of any disputes or default. Right after signing or during signing, the loan proceeds will be given to the borrower.
- Filing and monitoring the loan payment.
The last procedure of commodity financing process transaction is Filing and monitoring of loan payment. The documents must be properly safe kept in the safety vault or in any area that is truly secure because aside from the inputted details in the system banking, this is also a proof that that person has a loan to you. It is important secure the hard copy even though you have already a soft copy of it because it will be a quite alternative of tracking when there is a difficulty in the system.
Finally, we need to monitor the payment of the borrower. Did he always pay on time? Monitoring of payment should be done regularly to avoid past due.
Upon writing this topic, I’ve come up with a conclusion that when applying of commodity financing process or any loan, a borrower must disclose information truthfully.
In credit assessment or credit investigation, it must be done thoroughly to avoid default in the near future.
Eventually, the counselling must be done clearly. Ask follow up question if necessary to test if the borrower understands what you are being discussing to her. Sometimes, we encountered many problems due to wrong interpretation of what has being counselled and how you deliver your counselling. So as to avoid it, make it simple but clear.