Credit Engineering for Bankers, 2nd Edition

Chapter 1 Introduction to Loan Decision Making: The PRISM Model

Chapter Outline

• Management 5
  • Business Operations 5
    • Company Information 5
    • Industry Information 6
  • Management Basics 6
  • Bank Relationship 7
  • Financial Reporting 8
• Intention (Purpose) 8
• Repayment 9
• Internal Repayment Sources: Short-Term Loans 9
• External Repayment Sources: Short-Term Loans 11
• Internal Repayment Sources: Long-Term Loans 12
• External Repayment Sources: Long-Term Loans 13
• Safeguards 13
  • Collateral 14
  • Guarantees 14
  • Covenants 14
• Perspective 15

Unlike Mark Twain’s cat that once sat on a hot stove lid and would never again sit even on a warm one, bankers should always be careful to get from an experience just the wisdom that is in it—no more, no less. Banks need ...