Credit Analysis and Finance Flashcards
What are the public sector’s three financing goals?
Lowering the cost of borrowing, lowering the credit risk of a company, and increasing access through different investment products.
How does the public sector lower the cost of borrowing? Give an example.
The public sector subsidizes the difference between the market and the discounted rate thereby reducing the interest rates that the borrow must pay a lender.
Examples include direct financing, low interest loans, linked deposit programs, and small issue tax-exempt Industrial Development Bonds.
How does the public sector lower the risk?
The public sector guarantees a percentage of a private sector loan against default. In layman’s terms, it promises to assume responsibility for a percentage of an outstanding debt in the case of default, thereby making a loan more secure and a more attractive investment for the lender.
Give an example of different investment products the public sector can offer.
Different investment products include start up loans, small working capital loans, microloans, seed and venture capital, export loans, and Small Business Investment Companies.
As a loan packager what does an economic development practitioner do?
EDO’s act as a conduit: facilitating and coordinating the loan process. Main responsibilities are identifying and screening loan applicants for their eligibility, and promoting private sector participation in the lending process.
What is Financial Administration?
Technical Assistance on basic accounting concepts, how to produce financial statements necessary for loan applications, how to manage cash flows, and plan and manage budgets.
What is Business or Strategic Planning?
Training in drafting a “blueprint” for the business including goals, strategies, action plan, and setting benchmarks to measure success.
What is Management Assistance?
Training that includes negotiations, taxation, inventory management, production and management systems, and employee issues.
Technical Assistance on Marketing/Selling Strategies includes what?
Includes training on how to conduct market research such as defining the market in terms of demographics, geographic location, pricing and other factors, selecting sales techniques appropriate for their market; and preparing market literature.
Technical Assistance on Product Design and Development includes what?
Assisting on creating prototypes, improving product performance, lowering product costs, and customizing products. Product development experts are generally required for this type of assistance.
What are Economically Targeted Investments?
Economically targeted investments direct funds to opportunities that earn competitive financial returns while producing economic development benefits.
