QUESTION ONE

a) Discuss the stages of credit appraisal for a customer (5 marks)

A lender or banker evaluates a prospective borrower's creditworthiness as well as their
technical viability, economic viability, and bankability through the credit appraisal
process.
 Information collection- This involves collecting information about the applicant’s credit
history including past repayment record of the customer, organizational reputation,
financial solvency, as well as their transaction records with the bank and other financial
institutions. This will enable the lender to tell if the borrower is credit worthy or not.
 Information analysis- In this stage the information collected is analyzed and is
determined if its true or not though scrutiny of personal corporate and legally binding
documents.
 Approval or rejection- Having analyzed the information, the lender can then decide
whether the assessed level of risk is acceptable.

b) Highlight the advantages of creating a company’s internal debt collection unit (5 marks)
 You may keep your customer if the debt collecting company is cordial and professional,
but this is unlikely if you file a lawsuit.
 In the event that your client continues to refuse payment, the agency may direct solicitors
on your behalf.
 Debt collection may save you time because it is a quick way to recover debts.
 Debt collection units have the necessary time, knowledge, and resources.