HOW TO APPRAISE TERM LOAN PROPOSALS?
(This post explains important ratios are to be examined while appraising a term loan project. The article also deals with how to compute break even point , how to calculate DSCR (Debt service Coverage ratio) for the period of repayment of the loan, how to arrive fixed asset coverage ratio and important financial indicators . The assessment of DPG/APG etc is done in the same method how term loan is assessed, as they are the substitution of the term loan.) Term loan appraisal covers the appraisal of the borrower and appraisal of the project. The characteristics of a term loan are that term loan commitments are to be of long term. The banks and financial institutions normally offer term loans repayable in 10-15 years and beyond that period in exceptional cases like housing loans. The repayment would be made out of cash generated from business activities. Appraisal of the borrower covers the honesty and integrity of the borrower, the standing of the borrower, business capac...