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What are the factors affecting a lending decision?

Just as the law can seem mysterious to non-practitioners, the way bankers arrive at lending decisions may appear arcane. Chris Marston, Head of Professional Practices at Lloyds TSB Commercial, provides a summary of the fundamentals of credit assessment.

It’s worth emphasising that the overwhelming majority of business lending decisions are made at local level, but the principles remain the same if a central credit function is involved.

We consider how long the firm has been established; how well we know it and how well placed it is to face the future in terms of staff and premises. We look at succession planning, the business mix and competitive issues. We look at the track record and experience of the firm’s management team and assess its ability to be effective in changing economic conditions. We consider whether management is prepared to take external advice from accountants or other advisors, and whether previous lending arrangements have been honoured.