Financial Lending Services: A Comprehensive Report

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Theory Assignment
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Table of Contents
Introduction:....................................................................................................................................3
1.......................................................................................................................................................4
2.......................................................................................................................................................6
3.......................................................................................................................................................8
4.....................................................................................................................................................10
5.....................................................................................................................................................12
6.....................................................................................................................................................15
Conclusion:....................................................................................................................................17
References:....................................................................................................................................18
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Introduction:
This assignment explains the money lending services provided by the organization and the
transaction between broker and clients. It defines the nature of services offered by the broker to
their clients. The importance of communication skills in collecting the client's information is
discussed in the project. It shows the requirement of data documentation for following up with
the services. The different types and sources of loans available in the market and the
recommendation process are discussed in this assignment. It explains the organization's
techniques of risk evaluation and source recommendations to ensure the satisfaction of the client.
This assignment, in short, provides an overview of all the aspects of financial lending services
offered by the broker to their clients.
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1.
The service of fulfilling lending requirements of the clients has been of great importance as
funding is required in every aspect of working. The financial need can be of any type which
includes the requirement for building or buying a residence, for the financing of business
projects, for education or health purposes and many more. The conditions are uncountable as
money is required in for carrying any economic activity(De Nicolò, 2015). The wealth
distribution is not equal, and thus lending becomes the essential source for fulfilling these
financial needs of the person.
Lending is a process in which there are two parties involved named the lender and the borrower.
The lender provides loan to the borrowers for carrying out its operations, and the borrower in
return pays the interest amount to the lender in addition to the principal amount of credit. This
process helps both the parties as the lender earns interest amount on its ideal money, and the
borrower can perform its operation out of the funding. There are various sources of lending such
as banks, financing institution, moneylenders etc. Some other essential sources of borrowing are
shares and bonds which are available for companies. Every source has a different processing
system of its own(Bridges, et. al., 2014). These processes are complex and time consuming for a
lot of people. To reduce these processing processes and obtain the loans smoothly people go to a
broker who serves their clients in assisting in every aspect of lending.
Broker analyze the nature and amount of the client's requirement and provides solutions
accordingly. Identification of the best source for their clients which fulfil their cost expectations
and offer them with the maximum satisfaction is the motive of every broker engaged in these
services. The clients are asked some vital information before working on the issuance of their
loan value. These questions include all critical data, some of the fundamental questions asked are
about the amount of funds they require, the time period for which the funds are needed, the
reason for taking credit, existing financial status of the client, their credit score, reliability and
security defining the repayments of loan, their preferable source of finance and expected cost to
the funds etc. While communicating the useful information, excellent interpersonal
communication skill is required as there are clients who are from different cultural backgrounds
and this information is susceptible for both the parties in the transaction because it influences the
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decision of the parties(Campanella, et. al., 2013). It is crucial to have appropriate communication
skills to serve the clients in a better way as well to increase the clients of the business. The
different methods are applied to approach the clients who are using or wants to apply for loans,
and their queries are handled with due importance. These methods include telephonic
conversations, personal meetings, advertising of the services. All these methods require an
understanding of client's needs and assisting in the most effective way.
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2.
Documentation plays a vital role in assessing and serving the clients of the organization. The
recording of all the information is very crucial for the business as the information related to the
financial status of the person are considered very sensitive(Lenihan, 2015). The broker performs
various tasks to collect the required information from the clients and then the analysis is shown
on the collected data to provide the required services. The nature and criteria of services are
defined by the clients, and the organization needs to understand these effects.
When a client approaches the organization a basic questionnaire is filled by them which help the
broker to collect the client's information related to the nature, amount, time, purpose of their
financial requirements. The organization takes an initial interview with the client to understand
their needs to serve them better as a large number of information exchangestake place on the
telephonic conversation to have access to these information organization records these telephonic
conversations. They record the essential elements of their interview with clients in theirclient’s
database system.
Documentation of important information is essential as it affects the services of the organization.
Also, this data is the need for future referencing purpose(Knaggård, 2015). The organization uses
various specialized softwares, spreadsheets, databases, organizational templates to maintain the
records of their clients. The file of each client is separately maintained which contains all the
relevant information about the client, their need and requirements and according to the analysis
of these files, the company make a recommendation to their clients.
Collection and documentation of data both require proper efforts by the brokers to provide
quality services to the clients and maintaining the operational effectiveness of the organization.
Brokers collect data from the clients through personal conversation and documents collection.
This data is securely stored in the organization to protect the privacy of clients. The files of
clients are categorized according to the types and timing of loans they need, and then
organization imply its operating process on these files(Agarwal, et. al., 2014). The data are
arranged according to the loan priorities of the service receiver. And according to the
information broker make recommendations to the clients about the period, type and source of the
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loan they should opt for. They also explain the implications of the law and a guideline associated
with the lending source and assists in fulfilling those requirements.
Thus, the process beings with the proper collection of relevant information, documentation or
recording of the news and the analysis of the data take place according to which
recommendations are provided, and then the brokers help the clients in fulfilling the loan
requirements and hence providing loans. This documentation helps to update with regular
payments and to maintain an organization's client database. Therefore it is an important element
to record and document interaction with the clients.
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3.
There are various researches which are required to be conducted for providing the solutions to
the client's requirements. Complex broking solution is the broking solutions offered by the
brokers in response to the complex needs of their clients. Broking solution here means the
services provided by the broker who helps the person in acquiring a loan from the bank, financial
institution or any other source of finance. It also includes the services of recommending the loan
structure and source to its clients(Mocetti, et. al., 2017). The clients to these organizations
include; individuals, associations, partnership firms, companies and all the persons who are
needed on finance for any purpose.
The process and nature of the loan are dependent upon the type of client and its situation.The
complicated situation of the clients are analyzed, and the solution to their problems are provided.
The case can be of any kind; for example, an association requires funds for financing its working
capital needs and is confused in the selection of source and period of financing. In such a
situation, the financial information of the company is analyzed, and the recommendations are
provided accordingly which can be most beneficial for the health of the company. These
solutions are discussed with the respective associations and reviews are made following the
concerns of the party.
The situation of the company is discussed with the solution and opportunities and constraints
coming out of the discussion are handled with expert knowledge and skills. Research for the new
sources of loan is made to provide with a more diversified range of solutions. Lending solutions
and structure of loans are defined keeping the financial conditions of the company and other
outside factors such as economic factors, legislative issues, taxation problems, legal implications,
insurance and others. All these factors affect the situation based on which decisions are made in
the organization(Yan, et. al., 2015). That is why all these factors are paid due to importance
while analyzing the situation.
Organizations uses high class IT softwares which helps them in providing better services in the
industry market. In the extraordinary situations which are not manageable by the broker
themselves as they require higher knowledge of accounting and finance then these the case files
are forwarded to the tier one advisor of the organization who is experts of accounting and
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finance. The organizations uses IT softwares, and then personal expertise is applied. The loan
structure is firstly analyzed, then prioritized and finally measure to fulfil the requirements. The
selection of correct loan sources and structure is necessary to help the client achieve their
objectives as it will improve an organization's operational effectiveness. Information is needed to
collect effectively, shared and understood to achieve the satisfaction of the client as well as
enhancing organization and brokers performances and knowledge.
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4.
Risk Management is essential for every organization to prevent it from becoming their assets as
non-performing when the client unable to repay the principal amount of loan along with interest.
Thus, to manage credit risk broker check the CIBIL score of the borrower prior to sanctioning
them (Rampini et.al., 2019).
How the risk has been evaluated by the broker while the loan to the client?
Under risk evaluation, the broker will determine the associated risk along with their returns and
categorize them accordingly on the basis of risk management policies of the lending organization
(Fattahi and khalilzadeh,2018).
Following steps should be followed by the broker for evaluation of risk:
Step 1: Set Review Mechanism for judging the financial background of the client and it involves:
• Review the business as well as operational plans of the client.
• Legal compliances and standard regulation followed with due care.
• The risk associated with information security.
• The reputation of the customer
• Productivity
• Finances
Step 2: Clearly defined their evaluation criteria in their bylaws and it is being measured as to
define which impact the most to the organization on the basis of high, medium and low.
Moreover, Risk assessment tools have been used by the department and units for evaluating the
risk on the basis of availability of current risk information.
Risk Assessment can be done in two ways either can be considered the qualitative factors or it
can be on the quantitative factors (Viljoen et.al., 2018).
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In Qualitative Risk Assessment, assessment of future risk has been evaluating on the basis of
SWOT analysis and data analysis of their historical events (Viljoen et.al., 2018).
In Quantitative Risk Assessment, once the risk assessment on the basis of qualitative factors has
been completed and the said risk discovered qualitative risk assessment has been processed
through the quantitative risk assessment and the further assessment has been done on the basis of
costing parameters (Viljoen et.al., 2018).
The valuation report has been generated by the broker to the client to show the true value of their
encumbered property and it helps in generating their creditability of getting loan assistance from
the financial institutions (Easton and Sommers, 2018). In the valuation report, the probability of
risk also computed on the basis of chances of unfortunate risk factor multiplied with the
destruction of assets in terms of value.
Prior to sanctioning the loan the requirement of the borrower, the financial institution must need
to identify their stakeholder and get their approval. Stakeholders involve existing creditors,
directors, employees and their supplier, etc. For an internal controlling point of view, need to
present the risk assessment report to the stakeholders to describe their associated risk after
sanctioning the loan to the client whether they require amendment in risk assessment plan or not.
As a professional of the industry, the financial institution or lending institution must have to
follow their government norms regarding sanction of financial assistance, it varies according to
the industry like in case of ease of doing business, and Government set fewer standards or code
of conduct to the financial institutions.
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5.
As a Financial Consultant cum broker suggested to the client that following loan options
available to him for raising money from financial Institutions by considering their pros and cons
as well:
A loan from Bank: It is the easiest way to get a loan from a commercial bank for the borrower,
just need to comply with the banking norms as notified according to the Banking Regulation Act,
1949 (Illueca Munoz et.al., 2018). They charge different interest rate varies according to the
types of loans as follows:
1. Credit card loans: It is also known as a Debt consolidation loan, where borrowers pay their
outstanding consolidated debt by their monthly payment with lower interest rates.
Advantages of Debt Consolidation Loan
• It carries a lower interest rate.
• It does not require mortgage property while sanctioning then credit limit to the borrower.
• Easy to repay
2. Personal Loan: This loan sanctioned to the borrower for meeting out their personal expenses
like paying off their bills or purchasing of a motor vehicle for personal purpose. The bank
requires following documents prior to sanctioning of loans like proof of assets they want to
purchase and proof of borrower income.
3. Home loan: Home loan helps the borrower to get financial support from the bank for buying
their own house. They generally issued for the long term May 20 to 30 years and carry a high
rate of interest started at 8.30%. Home loans include home loans for repair, for purchasing of
land.
Advantages of taking a bank loan from the client’s point of view.
1. It carries a lower interest rate.
2. Involvement of proper regulatory authority like RBI.
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