SME LOAN PRODUCTS

Financial awareness for SMEs.

Soneri Bank Limited.

Introduction
Soneri bank was incorporated on September 28, 1991.
The first branch of bank was formally opened doors of operations in Lahore on April 16, 1992. Mohammad Aftab Manzoor, President & CEO The sponsor directors of the soneri bank Limited are

from M/S Rupali Polyester Limited.

Vision
To better serve customers to help them and the society grow.

Mission
We Provide Innovative and Efficient Financial Solutions to our Customers.

Business areas for lending

Commercial banks usually serve following business needs of SMEs:
Working Capital Financing / Procurement of Inventory Asset Investment needs Fixed / Capital Investment Seasonal demands Guarantees Import / Exports

Working Capital Financing

Purpose: Purchase of stocks (raw material/finished/semi-finished goods) and spare parts. Tenor: Short-term facility (upto 1 year) Loan type: Running / revolving credit Security: mortgage (urban), hypothecation of plant/machinery/stocks, pledge of govt: securities

Asset investment needs

Purpose: To meet current asset investment needs. Tenor: Medium-term (max. 3 years) Loan type: Term loan facility Repayment: Monthly / quarterly fixed installments. Security: mortgage (urban), liquid securities with 10% to 20% margin.

Fixed / Capital Investment

Purpose: To meet fixed asset investment needs (e.g; purchase of plant / machinery, building
premises)

Tenor: Long-term (max. 5 years) Loan type: Term loan facility Repayment: Monthly / quarterly fixed installments. Security: mortgage (urban), liquid securities with 10% to 20% margin.

Seasonal Demands
Tenor: Short term finance. Allowed up to a maximum period of 6 months. Purpose: For the procurement of seasonal crops. The goods / crop are taken under Banks pledge/custody, through Banks approved Muccadum, who controls & supervise the stocks, thereafter provides the Bank, stocks report duly counter signed by the party.

Seasonal Demands
Tenor: Short term finance. Allowed up to a maximum period of 6 months. Purpose: For the procurement of seasonal crops. Security: Goods / crop are taken under Banks pledge/custody, through Banks approved Muccadum. Repayment: Adjusted within 6 months, upon receipt of part or full payment. Delivery Order are issued accordingly.

Guarantee
Tenor: 1 year, 3 year or 5 year. Purpose: advance payment, performance bond, etc. Security: 100% cash margin, fully secured against liquid securities, partially secured against mortgage (urban property). Type of guarantees: Bid bond, performance bond, advance payment, financial guarantee, shipping guarantee, customer guarantee, utilities guarantees.

Import / Export
Wide range of trade products are available to fulfill import/export needs of an SME:
Foreign Bills Purchase or FBP Inland Bills Purchase or IBP Inward Foreign bills or IFB Foreign Currency Finance under FE 25 FLATR ( For Importers) Export Finance ( For Exporters)

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

SOURCE AND CAPACITY OF REPAYMENT AND CASH FLOW BACKED LENDING

Identifies the sources of repayment by visiting the physical plant. It asses the repayment capacity of the borrower on the basis of asset conversion cycle and future cash flows. Condition of borrowers industry Identify key drivers of business and risks/ mitigants

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

PERSONAL GUARANTEES

Soneri bank requires PG of all owners of SME except: Facilities secured against liquid assets. Nominee Directors of a limited company.

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

LIMIT ON CLEAN FACILITIES Soneri bank Limits the clean exposure (against PG) of SME as follows: Total (fund based and non fund based) Rs 3 Million Fund based Rs. 2 Million Clean facility is only provided to old and trust worthy customers who have good record with the bank and other banks 1. Declaration from SME that, in aggregate, it is not breaching this limit 2. Trust rciept 3. BBFS

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

MARGIN REQUIREMENTS

Taking into account the risk profile of the borrower. Risk profile is determined by the credit officer through qualitative analysis and they have a system software named risk rating matrix software. Details are sent to the risk management division who verify the details. Risk is also judged by industry and company analysis and past record of the firm.

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

MINIMUM CONDITIONS FOR TAKING EXPOSURE

ECIB
Audited financial statements. BBFS

IMPLEMENTATION OF PRUDENTIAL REGULATIONS WHILE LENDING TO SMEs

PROPER UTILIZATION OF LOAN

Difficult to ensure that the loans are properly utilized by

SMEs. Verify the documentation provided for the loan before giving the exposure.

CHECKLIST FOR CREDIT RELATED SME'S PRUDENTIAL REGULATION COMPLIANCE

PROPOSAL AGAINST LIQUID SECURITY

LG PROPOSAL AGAINST LIQUID SECURITY

THANKS