The bank in wishing to give loans requires certain information from the applicant. The bank wants to know:

 a) The purpose for which the loan is required

b) The adequacy for that purpose of the amount being sought

c) The nature and adequacy of the underlying security and the ease with which it may be realised if necessary

d) The proposed arrangement for the payment of interest and the period over which repayment of the principal sum will be completed

 So, to carry out an investigation the following procedures are generally adopted:

 General

a) The background and professional standing of the promoters of the company;

b) The viability of the concern in the light of current and probable future requirements in the area of operation;

c) The size of the existing market and the likelihood of success for a new venture;

d) The quality of the goods and services to be offered must be compared with what is already available including comparison of price;

e) The availability of suitably located premises at an economic rent possessing permission for the use intended.

 Financial

 a) The bank wants to know the extent which the promoters can match the requested finance with their own resources;

b) Their personal financial status, the possibility of providing personal guarantees as security for the loan sought;

c) Their past success or failure in business ventures;

d) Their ability to provide references as to their commercial acumen, honesty and integrity in business dealings.

Schedules included in the presentation

 a) The cash flow budgets of the proposed concern for the first two years of operation (usually the most difficult for new businesses). At this stage cash budgets are far more significant than profitability, although the bank will obviously wish to be satisfied as to potential future profitability;

b) Estimates, set out month by month, of income from sales/services, net of direct (i.e. variable) expenditure incurred in earning that revenue;

c) Estimates, once again set out monthly, of the fixed and set up costs likely to be incurred from the inception of the enterprise. Such expenses would cover:

i. Administrative salaries including directors drawings;

ii. Establishment expenses e.g. rent and rates, premiums on leases, installation of telephones, light and heat;

iii. Refurbishing and decorating costs to meet the company's initial requirements;

iv. Cost of acquiring furniture, typewriters etc.;

v. Initial and regular advertising direct mail, stationery;

vi. Repairs and maintenance;

vii. Interest charges on the finance which it is hoped the bank will extend as a result of the presentation;

d) A duplicate set of estimates and under (a - c) above except that they should be prepared on the basis of a worst position.