Evaluating a corporate for banking facilities? Start with the Trial Balance instead of the Annual report

Corporate lending can be challenging. Credit Officers are overwhelmed by the amount of information they have to process about a company to determine the facilities granted to them.

Credit officers start by examining the Balance Sheet and P&L statement and restate this as per the Bank's norms. This exercise yields a true picture of the state of finances of the corporate. This makes it possible for the credit officers to compare the financial health of the company with those of others in the same industry and sometimes even across industries.

The exercise of pouring into the annual report and restating the Fianacial Statements requires a lot of effort because officers have to read these financial statements along with the Auditor's report and notes to account for caveats that affect the financials and decide whether these materially affect the company's financial health or discard these altogether.

Instead it would be easier if there was a method that would take the Trial Balance of the corporate and state the Financial Statements as per the Bank's norms based on a pre-defined template. This will enable the bank exercise supervisory control on the companies to which they extend credit facilities. It also helps companies provide the trial balance on a regular basis to the bank to restate their financial health.