3.18.2 Management Capabilities:


There is no set rules to quantify/ confirm management's intentions/ capabilities. Nevertheless, different aspects of the management of the client have to be mentally perceived and recorded on best judgment/ effort basis. Management information can be gathered and evaluated in the following angles: Significance of management profile evaluation.

Survey of relationship gone ill reveals that for many cases, the management was evaluated liberally. Lenders should take management profile of a company very seriously. After all, it is the management who moves the business whether in the right or in the wrong direction. If, as lender, we do not like the

Management now, we certainly will not like it when we will ask them to repay. Integrity

This is the prime important criterion. There are no set rules for testing this, however, information/ comments from competitors, creditors, business associations/ clubs, etc. are indicative of the client's integrity. Single trouble management

One man show,

Autocratic attitude,

Lack of delegation,

                                                                   Inappropriate positioning of people in different responsibilities,

Lack of personnel to act as second line of defense, or succession.

                                                                   Much entrepreneurial attitude, (willing to do several start up projects at a time, constant interest in new projects), etc. Experience of owner.

It is important that the owner, the key men have thorough knowledge of the works of the sub‑ ordinates. Lack of experience always results in over dependence on subordinates, and inadequate guidance/ management ability. Information System.


Existence of a well established net work of market information is essential for any business, other wise a company loses its touch with the ground Sales team can be a good source of information for market dynamics for retail/ whole sale business.

Relationship with competitors/ customers is another source.

Use of published information is also very useful.



Current and on going information system on inventory/ receivable control, financial figures, etc. should be established and correctly interpreted, lack of skill to interpret‑data may result in under utilization/ misinformation all together.



3.18.3 Financial Strength:


(C) Accounts /Financial information should be evaluated in the following directions: Accounting Policy.

It should be marked as change of policy may effect on the profitability/ leverage, etc. Auditor’s qualification.

Often qualifications are not clearly expressed which may have much impact on the financials. Other bank’s limits/ outstandings.

This should be determined and ensured that client made full disclosure.

Existence of other financing facilities is to be netted out from total finance requirements of the client, otherwise over financing, hence over‑trading becomes a serious risk. Modus operandi of the business/ deal, vis-à-vis facilities to be provided.

This has to  be matched. Care should be exercised to distinguish between current and term requirements, permanent working capital requirement is often errDhakaously financed by short term

Loan, often client's intuition is taken for determining finance requirements, temporary / seasonal raise in requirement is often mistaken for regular requirement, or not at all accommodation.

Such mistakes lead to financial mismanagement on the client's part as well as on the part of the financier.