Readings:
1. Note on Bank Loans.
2. US Bank of Washington case.
Assessment of major risks, including impact of forecasted economic trends and the strength of competitors.
You can conduct a qualitative assessment of the quality of the borrower’s management team, the alignment of the management’s interests with the bank’s interests and expectations. Ownership and compensation systems will indicate management’s stake in the business.
You can assess the key risks associated with the loan. Some risks are associated with the borrower and his or her business; other risks are associated with potential changes in environment, cyclical activity, regulations, or other unanticipated developments.
Based on you analysis above, make a decision on whether the loan should be granted or not and clear state your reasons. The decision could be a conditional one, for example, you can specify that when certain conditions are met, the loan will be granted, otherwise, the loan will not be granted.
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