A detailed guide to the loan application and administration process
Previously, we have already written about the loan schemes available at Hitelpont, we presented the loan products currently available and discussed what loan product fits specific situations better. But so far, we haven’t gone in-depth into what the loan application process and the administration look like in practice. In this article, we will describe in detail how we manage transactions at Hitelpont and summarize the different phases of the loan application process.
By presenting the process, we would like to give support to those entrepreneurs who are less familiar with applying for a loan, as the current crisis may cause sleepless nights for many companies that have operated profitably before.
At Hitelpont, we handle transactions in sales phases. We can identify multiple phases in the loan application process, starting with the initial request to the disbursement of the loan amount.
LOAN PRODUCTS CURRENTLY AVAILABLE AT HITELPONT:
MFB Business Financing Investment Loan
MFB Business Financing Working Capital Loan
1. First contact
When the need for a loan emerges, businesses get in touch with financiers. Entrepreneurs might visit their banks, they usually consult an expert or browse the available options online. At Hitelpont our clients can always request a callback from our sales staff, we are also available by phone or in-person in our office, thus we are ready to inform our customers about the details of loan products and the loan application process can be initiated easily.
Normally, it is advised to arrange at least one meeting in person, however, in response to the coronavirus, we are encouraging everyone to primarily keep in touch with us via electronic and phone consultations. In any case, we believe that it is worthwhile to enquire about the loan application process so that we can better assess customer needs and discuss the exact conditions for certain types of loans.
Upon the first enquiry, we usually request about the following information:
- What is the client’s need? What is the objective of the loan?
- Who is the client? How long has the business been operating?
- What are the potential collaterals? Do they have real estate collateral?
We examine the client’s need regarding which available product suits their need the best. It is important to clarify the conditions of the loan application in the early stages and inform the client about what requirements they need to meet in order to start the loan application process. Products may differ in terms of the administration process, conditions and the required documents.
The loan objective must be defined at this phase, as this affects the decision between loan products. As the financial source of the loan products available at Hitelpont is either the Hungarian State or the European Union, we usually face a complex set of rules and conditions with each application.
At the first contact, we also enquire about the collateral, it is advised to come prepared for these questions as this information is essential for the next phase. We need to emphasize that we always expect marketable, lawsuit- and encumbrance-free real estate collateral from our clients.
While commercial banks evaluate companies in a more mature life cycle primarily based on their financial performance and history, at Hitelpont we also provide financing for companies in early stages, even for start-ups. In this case, it is pointless to conduct financial analyses due to the lack of economic past or the smaller economic value – thus the emphasis shifts towards the collateral.
The loan application process can also be initiated online, however, it is recommended to have a meeting in person to assess the needs accurately. (Source: Priscilla Du Preez, Unsplash)
2. Prequalification
After the first contact and the assessment of needs comes the phase of prequalification. The purpose of the prequalification is to examine whether we can provide a suitable solution for the client.
At this case, a preliminary assessment is being carried out based on the information previously obtained, an indicative offer is made. At Hitelpont we strive to ensure that the prequalification takes place in a short period of time, thus speeding up the administration process.
During the prequalification, we collect data about the company that is available for the public, this simplified company law investigation is carried out via the Opten system. Based on this information we are able to verify the company’s activities and see whether the company is legally entitled to apply for a loan. During this examination, we pay special attention to the individuals, companies, guarantors and affiliates involved in the transaction, in case if any kind of negative information emerges, it can affect the quality of the transaction. In the rarest of cases does this information prevent the provision of the loan, it only means that the case requires more attention and additional information.
Apart from this, the securities must be specified at this phase. From the point of view of the process management of the transaction, it is essential to get to know the details of the collateral, it serves as one of the most important factors when it comes to assessing the loan conditions. The most important kinds of collaterals:
- real estate – expected in all cases, typically mortgage, the prohibition of alienation and encumbrance, in some cases a call option is registered;
- first demand guarantee – from the business owners, managers and the companies involved in the transaction;
- security deposit – repayment guarantee, determined in proportion to the loan amount;
- prompt collection orders – for the bank accounts of the debtor and potential guarantor companies;
- insurance – required for tangible asset collateral;
- warranty – issued by the state or an institution (eg. Garantiqa) depending on the product.
In the case of real estate collateral – which is the most important element in most cases – it is essential to examine the marketability and financial viability of the real estate. In general, while commercial banks prefer to focus on the client’s economic situation and management history, at Hitelpont we rely on the value of the property. This is a key difference that allows companies in early stages to apply, those companies which did not do well last year can apply at Hitelpont as well.
To conclude it all, during this phase three key pieces of information are required for preparing the indicative bid:
- LOAN APPLICANT COMPANY: By having this information we can get to know the company’s sales revenue, business results and company law background.
- LOAN PURPOSE: We also examine the project that will be financed by the loan. It is important that the purpose of the loan is aligned with the client’s business activity and the loan conditions, as this is the only case that the client and the transaction can be suitable for the loan.
- COLLATERAL, SECURITIES: The collateral will also be examined, as the prequalification already includes a credit estimate based on the value of the real estate collateral and other securities. In this phase, we usually use the property value provided by the client to prepare the indicative offer, only after this will the official documents be submitted and the property valuated.
The information and analyses that will be processed in the prequalification form are the following:
- Persons and companies involved in the transaction:
- Signatories
- Owners
- Guarantors
- Credit assessment:
- Management history, results of the previous economic years
- Company law relations
- Negative company law information
- Project rating:
- Type of the loan
- Loan purpose (with cost elements listed)
- Location of use
- Loan amount, own contribution, VAT, VAT scope
- Expected loan term
- Conditions and discounts
- Collateral rating
- Property name, type, information from the Property Title
- Property value estimated by the client or based on a previous appraisal
- Photographs, if available
- Mentions or entries on the property deed
- Eligibility limit, maximum loan amount
The pre-qualification form (which is always prepared by our credit advisor colleagues) and the indicative offer include the credit calculation, the calculation of the margin limit and based on the information acquired it also shows the direction of the possible solutions for both the financier and the client. An accurate and detailed credit decision can only be made after the official submission of the loan application. These calculations provide an approximate loan qualification, so both the client and us can see clearly how it is possible to meet the customers’ needs. The indicative offer shows the value of the own funds required, the conditions under which it is possible to provide the loan are also defined. The approximate amount of instalments is also calculated, the customer is informed about the loan fees that might occur during the process.
The indicative offer cannot be totally accurate, as a significant part of the loan documentation is still not produced at this stage, but the available information provides adequate guidance for further negotiations and administration. A decision has to be made at this stage as the work will continue alongside the approved indicative offer. It is important to emphasize that the indicative offer is the outcome of a complex decision system, where even the slightest modification can result in several changes in the conditions.
In case the client agrees with the offer, we can proceed to the phase of collecting the necessary documents.
During the collection of documents, a significant amount of company law documentation is gathered. Summing up the most important content elements, we get to the proposal. (Source: Sharon McCutcheon, Usplash)
3. Collection of documents
Gathering the complete credit documentation is usually a long process and it varies from client to client. At Hitelpont we are aware that this phase can be stressful for our customers, so we compiled a list where we summarize the complete loan documentation requirement, thus facilitating the collection of the documents.
In this phase an appraisal of the real estate is carried out, which can be requested through Hitelpont. There is usually a 7-10-day lead time, which is necessary to organize, conduct and process the valuation.
At this phase, the following documents must be obtained:
Accounting documents:
- General Ledger
- Annual report
Taxation documents:
- Tax certificate about the registered office and site(s) from the capital/district/municipality
- NAV joint tax certificate
- NAV current account statement
Documentation related to the collateral:
- Property Deed
- Land registry excerpt
- Appraisal
Documentation regarding the loan objective:
- Quotations
- Presentation of the property purchase agreement
- Other documents verifying the loan purpose
After receiving the complete documentation – or parallel to that – the compilation of the transaction’s loan proposal begins.
4. Proposal
During the proposal, the entire loan dossier is processed, from which a 15-25-page proposal document is created for the credit assessment committee. The most important content elements of the proposal are:
- The summary of the client’s and the transaction’s data
- Business concept and customer analysis
- Detailed company law investigation
- Proposal for decision, establishment of the detailed conditions
- Detailed client data and debtor rating (calculations used for the rating, bank account analysis) KHR information
- Detailed information about the collateral, calculations of the credit limit
- Project cost composition
- Contract terms
- Disbursement conditions
- Resolution summary
- Disbursement information
During the proposal phase we repeat the calculations previously performed, we also calculate the credit limit with the final numbers. Knowing the accurate numbers, we can now calculate the amounts precisely.
The submission phase also includes the scoring of the client and the guarantors based on the data available from the company’s General Ledger and financial report.
If negative information emerges during the company law investigation, these are to be mentioned in the text of the document.
An important part of the proposal is the project examination, where we verify whether the requested loan is in line with the program.
The marketability of the property and the scoring of the client are also important factors, these are examined when it comes to determining what loan amount is approved taking the risks assessed in relation to the property and the client into account.
Our loan calculator for estimating the instalments is available on our web page. We need to note that individual discounts are not to be displayed in our loan calculator, more precise and detailed calculations are made during the proposal process.
In fact, the information we determined during the prequalification appears in much more detail in the proposal document.
Finally, the conditions of the contract and disbursement are defined, we also notify our clients if there are some additional documents missing.
The successful examination of the proposal results in the decision notice that contains all the final conditions. (Source: Leon Dewiwje, Unsplash)
5. Credit assessment
The credit dossier and the prepared proposal documentation is handed over to the credit assessment committee, and then the credit assessment process begins.
Further information might be requested for the decision, missing documents may be submitted, and the result is either a positive or a negative decision.
In the case of a positive decision, the financing decision already contains the exact terms and conditions regarding the contract and the disbursement. This document must be accepted by the client so that the preparation of the contract can begin. In case there are any questions about the contract, it is important to clarify everything and discuss the points in question.
6. Agreement
Until the credit assessment phase, it is typical that the transactions and demands are flexible and are prone to changes, but with the credit assessment, all details are put in place. However, several tasks must be performed during the preparation of the contract:
- the client collects and fulfils the terms of the contract,
- at Hitelpont we start the administration of the refinancing loan with MFB,
- the draft loan agreement is prepared,
- the signature of the contract must be organized.
The contract can be signed if all the conditions for concluding the contract are fulfilled by the client. All the loan products available at Hitelpont are refinanced loans, so we must submit a refinancing loan application to the Magyar Fejlesztési Bank (Hungarian Development Bank) and MFB will conduct their own processes as well, before concluding the contract. Hitelpont can only sign the contract with the client if MFB approves our refinancing loan application. This is followed by the organization of the contracting: all contracts are to be signed in the office of Hitelpont, in the presence of a notary.
7. Disbursement
The terms of disbursement are included in the Financing Decision and in the contract as well. If all the conditions are met by the client, Hitelpont will call the loan amount from MFB, which will be disbursed to the client upon arrival.
In case you are interested in any of our loan schemes, you can obtain more information by clicking on the Our Products button. On the bottom of all the loan product pages, you can find the loan calculator, which can be used to calculate the expected repayment instalments. The loan application process can be initiated online, it is also possible to request a callback from one of our colleagues. Should you have any other questions or be interested in a loan product available at Hitelpont, please call our customer service directly at +36-(70)-654-2486 or reach out to us at one of our Contact details.
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