USAID/BUSINESS FINANCE

BRFF/OMU

LOAN RECOMMENDATION
BORROWER:
LOAN PURPOSE: AGENT BANK: ENVIRONMENTAL: US SFOR SECTOR (Y/N) CANTON: CIT): MUNICIPALIT):
)EAR * 2 State )EAR + )EAR ,
)ea' * C#a&& - .at on Men Wo"en Natu'e o- Bu& ne&&: In$u&t'4 Se.to': Co5Bo''o6e'7&8: O6ne'7&8 an$ Pe'.enta%e& De"o/ # 0e$ So#$ e'& Retu'n n% Re-u%ee& Gene'a# Po!u#at on Date: Loan #:

LOAN AMOUNT/USE OF PROCEEDS (DM) Equ !"ent: Bu #$ n%& an$ Lan$: Wo'( n% Ca! ta#: TOTAL LOAN AMOUNT:
NEW TOTAL EMPLO)MENT OWNERS1IP:
Te'": G'a.e Pe' o$: Inte'e&t Rate: Pa4"ent&: Co##ate'a#:

2 P' 3ate

USAID GOAL7S8 MET: Select whatever applies from the drop-down menu, but dont get carried away with minute
effects. Also, dont say the loan provides high employment, unless employment creation is greater than one job for every DM !,!!! lent, i.e., at least half of the target.

TRANSACTION SUMMAR):

"he principal audience for the "ransaction Summary is #SA$D. "he summary should %tell the story& in a few pithy sentences that demonstrate why the loan is a good use of program resources. #SA$D should find your summary a pleasure to fa' to an in(uisitive )ongressman. *e sure it includes+ A description of the firms bac,ground and principal lines of business. "he %company bac,ground& section has been eliminated from the body of the recommendation form, so ma,e these three or four sentences sing. A statement of the use of funds, and the most convincing reasons the loan should be recommended and approved. -or e'ample, the loan might fund e(uipment that will eliminate a bottlenec, in the production process, enable production of higher-(uality goods, or allow start-up of a new product line under the guidance of a proven management team. .mphasi/e issues central to #S objectives in *osnia, such as employment. %"he e'panded operation will provide jobs to 0!! refugees.& A statement to the effect that the loan is sound, e.g., %1rojected cash flow is sufficient to cover the *- obligation throughout the term of the loan.& 2ever fear, credit issues are discussed in greater depth on the ne't page. A description of the physical location of the borrower that would allow a reasonably ,nowledgeable reader to visuali/e the firm. %"he firm is located on a ten-acre industrial site 3! ,m. south of *anja 4u,a, on the east side of the road to "u/la.&

CREDIT POLIC) E9CEPTIONS:

Approvals:

Len$ n% A&&o. ate: LENDING OFFICER: )redit Manager5"eam 4eader+ BF C: e- o- Pa't4: Bruce Spake

Date: Date:

Date:

USAID Bu& ne&& F nan.e Loan Re.o""en$at on USAID D 'e.to': CRAIG G. BUCK

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Date:

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SUMMAR) OF FINANCIAL INFORMATION

000 DM Sa"e (DM) Gro Mar,-. (/)
6ross 1rofit Sales

Ac!ua" Dec. &''(

Ac!ua" Dec. &'')

Ac!ua" Mar. &''*

#ro$ec!e% Dec. &''*

#ro$ec!e% Dec. &'''

#ro$ec!e% Dec. +000

#ro$ec!e% Dec. +00&

0per. #rof-! Mar,-. (/)

7perating 1rofit Sales

Ne! #rof-! (DM) Ca 1 2"o3 (DM)

2et 1rofit 8 Depreciation

De4! Ser5-ce Co5er. Ra!-o

2et 1rofit 8 Deprec. 8 $nterest $nterest 9 1rincipal Due

Break6e5e. Sa"e (DM)

7p. .'penses - Depreciation 6ross 1rofit Margin

Curre.! Ra!-o 7u-ck Ra!-o

)ur. Assets )ur. 4iabilities

)ash 8 A5: )urrent 4iabilities

De4!6!o68or!1

"otal 4iabilities .(uity

9o!a" :;u-!< (DM) Co""a!era" Co5era,e= >oa.6!o65a"ue USES OF FUNDS Co ! :;u-p@e.! Bu-"%-., a.% >a.% 8ork-., Cap-!a" 9o!a"

:e(uested 4oan ;alue of 1roposed )ollateral

SOURCES OF FUNDS 03.er? Ne3 03.er? #r-or I.5e !@e.! I.5e !@e.!

0pera!-., Ca 1 2"o3

USAID Bu -.e 2-.a.ce

0!1er 2-.a.c-.,

ANAL)TICAL SUMMAR)
<hile the "ransaction Summary presents issues of programmatic importance to #SA$D, the Analytical Summary should focus on credit. Again, the objective is to %tell the story,& highlighting the most important issues e'posed in the %Analyst )omments& and %-inancial Analysis& sections below. *egin with bullets that substantiate approval, followed by bullets that highlight the ,ey ris,s and mitigating factors of the credit. "hese bullets should be followed by a narrative analysis of the %strengths and wea,nesses& you have highlighted. )lose with our boiler-plate recommendation for approval.

Su/&tant at on
<hy is this loan a good asset for *-= <hat ma,es you %feel good& about the credit= $s cash flow e'ceptionally strong= Do you have confidence in managements ability to meet the sales projections= Does the company demonstrate unusually good financial management=

Su4 !a.!-a!-o. Su4 !a.!-a!-o.

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<hat specific e'posures does the company >and *-? face in meeting the proposed obligation= $s the companys mar,eting5distribution plan sufficient to support the sales projection= Are the companys suppliers reliable= Are financial management systems in place= <ould a small delay or shortfall in sales ma,e the company unable to meet its obligations= .ach ris, cited should be accompanied by an assessment of any mitigating factors.

R- kA M-!-,a!-., 2ac!or R- kA M-!-,a!-., 2ac!or R- kA M-!-,a!-., 2ac!or Na''at 3e Ana#4& &

.'plain why the loan should be recommended and approved on credit criteria. @our words in this section reflect our central contribution to the #SA$D *usiness Development 1rogram. 1lease provide your professional judgement of the company and the proposed credit. $dentify the relative importance you ascribe to salient features of the companys performance and describe how you have incorporated the bulleted factors above in the credit via the grace period, disbursement schedule, covenants, etc.

Re.o""en$at on -o' a!!'o3a# & /a&e$ u!on t:e ana#4& &= te'"& an$ .on$ t on& :e'e n>

ANAL)ST COMMENTS
1lease analy/e briefly each bolded aspect of the credit. $talici/ed suggestions are suggestions only. $f there is nothing particularly profound to say about the production process, for e'ample, just list the products and move on. Avoid repeating data from the Applicationyour goal should be to synthesi/e the impact of that data on the soundness of the credit.

P'o$u.t& (4ack,rou.% %a!a -. Sec!-o. B of App"-ca!-o.)=

4ist the companys e'isting products, as well as those planned to be developed with loan proceeds. 2ote your impressions of the efficiency of the production process and indicate any potential problems with suppliers.

Ma'(et&= Ma'(et n%= an$ D &t' /ut on (4ack,rou.% %a!a -. Sec!-o. 5 of App"-ca!-o.)=
2ote the mar,et segment to which the company sells. 1rovide your analysis of the companys mar,eting abilities. <hat does past mar,eting performance suggest about the companys ability to mar,et new >or higher volume? products= Does past performance lend credence to the companys sales projections= $s the companys distribution system sufficient to support planned sales=

In$u&t'4 an$ Co"!et t on (4ack,rou.% %a!a -. Sec!-o. ( of App"-ca!-o.)=

<hat is the health of the industry in which the company operates= $s it e'panding or consolidating= Aow does the company compare to its competition, both local and foreign= <hat distinguishes the companys products from those of its competitors= Does the company have the long-term strength to survive in its mar,et=

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Mana%e"ent an$ Co'!o'ate Go3e'nan.e (4ack,rou.% %a!a -. Sec!-o. ) of App"-ca!-o.)=

Assess the strengths and wea,nesses of the companys management >and *oard of Directors, if applicable?. Do the managers appear to have a long-term commitment to the company= Are they distracted by other ventures= Are they capable of meeting the sales goals in the financial projections= 7f controlling e'penses to protect profitability= Aow well do the managers ,now their mar,et= "he production process=

FINANCIAL ANAL)SIS

7/a.(%'oun$ $ata n Se.t on ? o- A!!# .at on8

)ombine your analysis of the historicals with your analysis of the pro for@a . Again, italici/ed suggestions are suggestions only.

Income Statement
<hat have been the trends of sales, direct costs, gross profits, operating e'penses, and net profits over time= <hat factors have driven company performance to date= Are they still in force today= Are the companys projections for gross and net profit realistic= <hat wea, points e'ist in the projectionsunrealistic sales goals= $nability to control costs=

Ba#an.e S:eet
<hat have been the trends in company leverage >debt-to-worth? and li(uidity >current ratio? over time= <hat does the companys management of its accounts receivable and payable suggest about financial management and responsibility= Aas the company serviced its debts as agreed= <hat is the justification for projected improvements in inventory turnover and collection of accounts receivable= Are all re(uired increases in wor,ing capital and other debt foreseen by this loan re(uest= <hat other capital investment needs can be predicted over the life of the loan=

Ca&: Bu$%et
Describe the companys collection cycle. <hat is the impact of seasonality on wor,ing capital re(uirements= Aave you proposed a structure to match=

De/t Se'3 .e
<ill the company produce enough cash to cover its obligations to *- and other creditors throughout the life of the loan= During which periods will the companys ability to service its debts be most in doubt= $s there a repayment structure you can suggest that would better meet the needs of the firm while protecting the integrity of *- capital=

Su!!#e"enta# Rat o&

Ca 1 Co5era,e Ra!-o (N#A9 C D)/# De4! Co5era,e Ra!-o (:BI9/(-/(p/&69r)) 8/C A%$u !e% Ca 1 Co5era,e Ra!-o 2ree Ca 1 2"o3 Se. -!-5-!< A@ou.! of 2C2 Se. -!-5-!< (DM)

)ea' *

)ea' +

)ea' ,

Co##ate'a# Co3e'a%e (4ack,rou.% %a!a -. Sec!-o. + of App"-ca!-o.)

<hat is your assessment of the mar,etability of the proposed collateral, as opposed to its valuation in the Application= $n your opinion, could the collateral pledged be li(uidated (uic,ly= <ould its sale price cover the full amount of the loan=

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MONITORING/DOCUMENTATION:
*-s standard pre-disbursement documentationas well as the standard covenants to which borrowers must adhere throughout the life of the loanare listed below. 6iven your ,nowledge of this borrower and the purpose of the loan, please suggest any adjustments or additions to the standard conditions precedent and covenants that would either provide additional protection for *- capital or match distinct characteristics of the proposed borrower. Modifications could ta,e several forms, including re(uired training, outside audits, maintenance of licenses, etc.

Co.%-!-o. #rece%e.!= S!a.%ar% Docu@e.!a!-o. D. D. >oa. Co5e.a.! = No a"e of a e! o5er EEEEEEEEEEE DM 3-!1ou! !1e pr-or 3r-!!e. co. e.! of USAID Bu -.e 2-.a.ce. No a%%-!-o.a" a,,re,a!e 1or!6!er@ %e4! o5er EEEEEEEEEEE DM 3-!1ou! !1e pr-or 3r-!!e. co. e.! of USAID Bu -.e 2-.a.ce. Ma-.!a-. a curre.! ra!-o of EEEEEEE or ,rea!er a.% a %e4!/3or!1 of EEEEE or "e !1rou,1ou! !1e !er@ of !1e "oa.. D. D.

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