Phases of credit granting

When someone applies for credit at a bank, the loan officer first interviews the applicant. During the interview the person gets the opportunity to explain all the reasons for getting credit. If the applicant is not sufficiently honest about his/her reasons, and the loan officer gets the feeling that the person will not properly follow the credit agreement terms, that will certainly be taken into account, as a negative factor, during the discussion of the credit application.

When someone applies for credit on behalf of an organization, the loan officer is obligated to verify all the data regarding the place of actual operations of the organization, the state of its property, etc.

The customer’s credit history normally contains sufficient information about his/her personality, the honesty of his/her motives, as well as the responsibility while getting and returning credit.

The international practice shows that banks perform a credit check from the credit bureau, which maintains a database of information provided by the banks. If the loan officer needs information about an applicant, he can turn to the credit bureau. In our country the role of information providers is played by ACRA Credit Bureau and the Credit Registry of the Central Bank, the existence of which considerably simplifies the overall information gathering process.

As it follows from what has been said so far, the crediting process can be divided into the following stages:

Negotiations: Crediting may be initiated by either the applicant or the bank. Normally it is much more expedient that the bank look for and find less risky and more profitable customers. But today’s real picture shows just the opposite; the customers are out there looking for a bank that will grant them credit.

Discussion of the proposal: During this stage, a special analytical division and/or the loan department of the bank evaluate the customer’s creditworthiness, the crediting object and the collateral.

Filing the paperwork: After discussing all the formalities, bank employees start working on the preparation of all the necessary paperwork, give specific crediting orders and compile the credit file of the customer.

Mandatory legal paperwork
The legal paperwork required as part of the credit application process may differ depending on the legal status of the organization or the sole entrepreneur, as well as the sphere of the operations. The list presented below is applicable to nearly all organizations. Those that are improper to your specific case need not be presented.

• State registry Certificate,
• Company Legislation, Founding Agreement,
• Licenses, if required,
• Financial statements,
• Statements and check stubs on tax and social security payments,
• Bank account statements,
• Audit conclusions (for OJSC-es and other organizations, if required),
• Contracts with suppliers, vendors and customers, if any,
• List of shareholders with the size of their share in the capital,
• List of debtors and creditors with the amounts of their debt(s),
• Other paperwork depending on the nature of the organization.

Collateral paperwork
In nearly all crediting cases the customer has to offer some type of collateral as a guarantee of returning the credit, such as the its land, real estate, equipment, vehicles, current asstes (raw materials, finished goods and products, etc.), personal property, jewelry, etc. The paperwork depends on which of the above is offered as collateral.

In case of pledging your apartment you need to present:

• Certificate of ownership of the apartment,
• Reference on the owner’s family size, number of people registered and actually living at the address (issued by the authority of the corresponding district),
• Reference from the State Cadastre that the apartment is not pledged and/or under arrest,
• Reference, attested by Notary Public, signed by the applicant’s spouse and all the adult family members stating that they agree to the fact that the apartment will be pledged. Note that the Reference should also include a clause indicating that the individual agrees that in case of non-fulfillment of the loan agreement terms he/she waives his/her right of ownership and the right to live in the apartment that serves as collateral in the above-mentioned credit agreement,
• In case of underage family members an agreement from guardians, attested by the Notary Public, and a commitment from the parents obligating them to secure a place of living for their underage children in case of non-fulfillment of their credit obligations,
• In case of an unmarried adult member of the family his/her attested agreement, or in case of a married adult member of the family, the copy of the Marriage Certificate,
• Agreement on the collateral,
• Certificate of the collateral,
• Other paperwork and documentation.

While pledging the property that belongs to the organization you need:

• Certificate of ownership,
• Agreement of ownership, reference on payments, as well as check stubs,
• Written agreement of owners and/or shareholders attested by the Notary Public,
• Reference from the Cadastre proving the fact that the property is not pledged and/or under arrest,
• Contract on the collateral,
• Certificate of the collateral,
• Other documentation and paperwork depending on the type of property.

While pledging a means of transportation (vehicle) you need:

• Statement of its evaluation,
• Its technical passport issued by the Road Police (GAI),
• Written consent of the spouse to the proceedings,
• Reference from the proving the fact that the item is not under pledge and/or under arrest,
• Agreement on the collateral.

Please note that the originals need to be presented with one copy of each.

In case of pawning equipment or other movables you need:

• Statement on the equipment’s evaluation,
• Its technical passport, proof of lawful purchase,
• Proof of lawful ownership,
• Statement on the fact that the asset is not on pledge and/or under arrest, as well as that it does not belong to a third party,
• Other paperwork depending on the nature of the collateral.

While pawning materials/products you need:

• Proof of purchase (invoices, check stubs, etc.),
• Statement on the product’s evaluation,
• Contract on collateral,
• Other documents, depending on the nature of the product, e.g. certificates of quality
• Special records on changes in contract terms, if any,
• A number of banks, such as “Anelik Bank” Ltd. Perform the estimates with the help of their own specialists saving some additional costs.

Utilization of credit: this stage is aimed at monitoring the borrower’s use of the credit, whether he/she follows the credit terms, whether the money is used for the purpose mentioned in the contract, whether the borrower makes the interest payments on time and whether the main amount of credit will be returned in full and on time.