Credit Process and its Stages

The lending process, or credit process, consists of several stages, including programming, granting, using and repaying bank loans.

Programming of credit investments is carried out by banks on the basis of credit applications of enterprises (applications for opening a loan).

The provision of loans consists in the issuance of money that guarantees the performance of non-cash settlements and payments by enterprises for the supply of inventory items, work performed and services rendered. The duty of banks is to fully meet the needs of enterprises in borrowed capital. The state of payment discipline in the entire national economy depends on this. The use of loans means the direction of bank funds to make payments on the obligations of economic and financial activities.

The most important conditions for the use of loans are the effectiveness of the event being financed, which makes it possible to ensure the receipt of cash proceeds and profits to repay the debt to the bank and pay interest money.

The return of loans means the return of funds to banks and the payment of the corresponding amount of interest money. The return of loans is of exceptional importance for the functioning of credit as an independent economic category of a market economy. It maintains the borrowing nature of bank funds and restores the portfolio of resources to provide new loans.

The lending process requires enterprises and banks to imperatively (imperatively) comply with the basic conditions for programming, issuing, using and reversing the flow of funds. These conditions are called the principles of lending and are determined by the essence and functions of the loan.

Principles and methods of short-term lending. The modern principles of lending include:
- provision of funds in accordance with the programs of economic and social development;
- target character;
- extradition to the extent of the implementation of economic activities;
- provision with material values, bills and securities;
- efficiency of use;
- the urgency of participation in the circulation of capital;
- return;
- payment;
- differentiation and mediation of payment turnover.

Consider the content of these principles.
1. Providing funds in accordance with the rules of economic and social development assumes that enterprises occupy a stable position in the commodity markets. Avant-garde enterprises enter into business contracts for a period of one to 5 years, which creates a sustainable prospect for entrepreneurial activity. On the basis of economic agreements, programs for economic and social development are developed, including financial and credit plans.

2. The target nature of bank loans is due to the fact that borrowed funds are provided for certain needs.

3. The provision of bank loans in proportion to the implementation of economic activities means that they are issued gradually, as production costs increase. In industries related to the sphere of material production, this is associated with the creation of inventories and other values ​​necessary for the manufacture of the corresponding products.

The gradual issuance of bank loans makes it possible to economically spend credit resources and create conditions for the effective turnover of the loan and all working capital.

4. The security of loans with goods and materials, inventories, bills of exchange and securities allows enterprises to use borrowed funds with a guarantee of return. It is especially important that each ruble of funds correspond to specific types of material values, including liquid goods provided for in business contracts.

5. Efficiency of loans means that they can only be provided with cost-effective commercial actions that allow for a returnable movement of borrowed capital. In most banks, the issuance of a loan is preceded by a preliminary analysis of the potential usefulness of the event being financed. The effectiveness of the use of borrowed capital depends on the filling of the relevant niches, the production of competitive products and the liquidity of assets.

6. The urgency of the participation of bank loans in the circulation of capital is due to the different speed of its movement in individual sectors.

7. The repayment of a loan is due to the fact that banks mobilize temporarily free funds of enterprises, institutions, and the population for lending. These funds do not belong to banks and are ultimately used by the owners for their direct reproduction purposes. The main feature of such funds is that, at the first request of creditors, they must be restored to their economic turnover (except for time deposits, target deposits, commodity certificates, etc.).

8. The payment of bank loans means the introduction by the enterprise of interest money for the use of borrowed capital. The payment of the loan has a stimulating effect on the economic and financial activities of enterprises. It encourages with the greatest effect to use borrowed funds to increase the production and sale of goods.

9. Differentiation of lending is due to the need to repay bank loans and the selection of the most reliable borrowers. The main reliability criterion is the solvency of the enterprise, which is based on the liquidity of the borrower's property and its ability to pay debts on obligations in a timely manner.

The mediation of the payment turnover is associated with the targeted provision of bank loans and the provision of stimulation of the circulation of capital.

In the modern practice of commercial banks, there are several channels for using bank loans. One of them is crediting the loan currency to the borrower's current account. Such operations open up the possibility of unproductive use of the funds provided and slowing down their turnover. Therefore, it is most expedient to send a loan for the direct making of payments on debt obligations. In addition to speeding up payments, this allows you to control the intended use of the loan.

The principles of lending are applied by banks as a single set of basic conditions for programming, issuing, using and repaying loans.

Lending methods are understood as a private way of participation of a loan in the circulation of working capital based on a targeted combination of organizational and economic methods of issuing and repaying bank loans.

Main lending methods:
- on the balance of inventory items;
- on the turnover of inventory items;
- on the turnover of payments.