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Think before providing loan

Account manager plays a very important duty for selection the party who is eligible for getting loan from financial company or bank. Company or bank asks any time from account manager about their view about selection of borrower. At this time, account manager should use their management accounting skills and provides useful accounting information, so that company can decide about the party for providing loan or credit.In accounting language, it is known as factors affecting institutional credit or loan . There are two main types of these factors.

1st Financial factors

a) Rate of Return

It is the duty of account manager to find the rate of return. Select all those party which want to give us high rate on our investment in the form of loan.

b) Risk Factor

Before giving credit to company, we also see our risk factor. i) personal risk- dishonesty , corruption ii) trade risk – see previous profit and loss account iii) Debt equity ratio iv) Income interest ratio

c) Security

Before giving credit or loan account manager have to see what asset of business , businessman want to give as security for getting loan .

d) Marginal of requirement

Before giving loan or credit , it is the duty of bank's account manager under govt. policies that he must see difference between security and loan Suppose Security $ 10000 – Loan $ 8000 = Marginal requirement $2000 If our providing loan is less than the value of asset which we have received in the form of security , then this is good .

2nd Non- financial factors


1. Social factors

Through social responsibility accounting, account manager is also check, whether providing of loan at low rate is benefited for social popularity or not.

2. Political factors

Account manager also check political and tax policies regarding providing of loan.

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Accounting Education: Think before providing loan
Think before providing loan
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Accounting Education
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