Finance Companies

The companies dedicated for financial activities such as resource management, acquisition and investment to make business are called finance companies. The financial activities help customer/public to grow in their respective lines. The financing companies provide a financial strength to grow up to the public. The finance companies are centralized. They have corporate center, branches and franchise outlets. They make the business in structured method to make the operation easy. The policy related to money and market, formed by the corporate is common for franchisee or owner. They deal with commercial, banking, credit risk management, sales/trading etc.

The financers Analysis

The analysis of financial statements is an introduction to Bank Financial Statements, which leads into this business. Financial services are worked locally, close to the customer, to ensure a high service level quick response times and tailor made solutions.

There are analysts who have experience in the analysis of financial statements. They lead Intensive Bank Analysis, Bank Analysis, Emerging Market Banks & Sovereigns and Non Bank Financial Institutions. Perspective on finance and leasing companies: rating agencies, debt and equity investors’ analysis are associated with the followings:

• Purpose payback model - dependence of finance companies on debt capital markets for refinance

• Risks to repayment: sector- and finance companies-specific analysis

• Structure: Protecting lender's interests: warehouse and borrowing base facilities and other structural issues

Company Operation

finance companies operate with the key risks and competitive issues by sub-sector such as sales finance, direct finance, equipment finance, credit cards and mortgages etc. The impact of minimal regulation and supervision; legal framework of secured lending are reflected in a good operation.

Direct Management, Franchise and Ownership

The centralized organization runs three major types of management: Direct Management, Franchise and Ownership. In Direct Management the critical management issues such as, strategy, risk appetite, processes and systems, market knowledge to be solved centrally. Franchise model assesses the validity of the business model, residual marketing and reliance on parent company, where relevant. The shareholders to be managed on quality of financial and business support; risks and benefits of cross subsidies. They are the part owner of the financial business.

Financial Fundamentals

The financial business stands and runs on the strong fundamentals not to cross beyond certain limitations:

• Statement logic; accounting policies for income, receivables, delinquencies and leases (finance versus capital leases etc.)

• Business risk: use of financial tools to assess quality of lease and loan book; reserve adequacy, owned versus managed book; residual risk

• Funding risk: stability and variety of wholesale funding sources, gap management, availability of contingency funding, liquidity and capital adequacy

• Securitization: benefits and risk of off balance sheet funding vehicles; residual risk, mortgage servicing rights and gain on sale accounting

• Performance risk: balancing risk and return; income stability and expense control

• Early warning signals: lessons learned from failed finance companies.

Financing Process

In finance companies, the processes are done perfectly and well planned. There are distinguished risks in the different business lines and products offered by banks and recognize how they are reflected in the financial statements. Understanding of the components of a bank's balance sheet and income statement is very important process to be performed perfectly. The impact of different accounting standards and policies on the financial statements are to be recognized well. The calculation and application of the ratios to quantify an institution's performance is also very important in the process.

Types of financial institution

The financial institutions are formed based the business to the balance sheet and income statement for various models.

Infrastructure development Finance: Finance for construction of Road, Dam, Bridge, Building, and Tunnel Tap our Global Bidding Network etc. Obviously, the finance is required for a community, so the processing is easier than other types. If the infrastructure is commercial such as industrial establishment, them it differs in processing of course.

Agriculture and Rural Development Finance: The Funding Corporation issues a variety of Federal Farm Credit Banks Consolidated System wide Debt Securities (Farm Credit Debt Securities) on behalf of the Farm Credit System Banks with a broad range of maturities and structures. The finance includes: minor irrigation, irrigation and water management, area development, forestry, horticulture and other plantations, sericulture, dairy, cattle development, poultry, fishery, aquaculture, agro-industries, agricultural marketing, and storage, agricultural credit, rural/village industries, handicrafts and rural energy sources including social sector like women and child development, rural infrastructure development and participatory management.

House finance: The house finances are provided to different needs such as for purchasing a house, house construction, modification and development. There are number of finance programs obtained by different finance companies. The types of house loans are: Fixed rate mortgage loans, Adjustable rate mortgages, Interest-only loans, First-time homebuyer programs, No closing cost loans, and Debt consolidation loans.

World Finance: The World Bank Group is a global financer, offers loans, advice, and an array of customized resources to more than 100 developing countries. International finance Corporation (IFC): This is a member financer of the World Bank Group, head quarter in Washington, DC. It finances and provides advice for private sector ventures and projects in developing countries in partnership.

Industrial finance: This finance is structured for a solution to the commercial and industrial marketplace. Industrial Finance Program (IFP) helps the customers to manage their wastes, control pollution, build and improve drinking water, waste water and solid waste facilities, and complies with environmental regulations.

Automobile Finance: This is also called Automotive Loan. The finance is sanctioned under certain criteria like monthly repayment capacity, margin money deposited, and purpose of buying a vehicle (commercial or personal) etc.

Business finance: Firms that lend money primarily to businesses. A secured business loan in which the borrower pledges as collateral any assets used in the conduct of his/her business, also called commercial finance or asset-based finance.

Personal Finance: This finance or loan is meant for personal use such as career development, remodeling your home, college expenses or consolidating debt. The cost of loans of this type is fairly high. This is due to the added risk taken on by the lender when issuing un-secured loans. This is a customized loan available with competitive rates and flexible terms; so that you can choose the loan to fit your lifestyle, needs and budget.

The Products and Key activities

Finance companies introduce the products and keep on the certain activities to market those products. Products are:

Credit products: performing and non performing loans, provisioning and write offs, leases, trade finance and guarantees

Trading products: long and short securities portfolios, derivatives, repurchase agreements and securities lending


Hedging: credit, interest rate and FX derivatives used for hedging purposes

Investments: consolidation methods and investment valuation; accounting for goodwill and minority interests.

Funding: deposits, commercial paper, bank lines, senior and subordinated bonds, ordinary and preference share capital

Securitization: use and impact of off balance sheet funding vehicles

Sources and quality of disclosure and impact of differing accounting policies

Companies’ Business Risk

The Asset Quality in the financing activities follows:

• Types of loan and loan portfolio analysis

• Non performing loans: definitions, reserving and accounting policies

• Ratios used to quantify the risk profile of the loan and lease book

• Analyzing trading, derivative and investment risks: value at risk, income volatility and other disclosure

• Securitization assets: residual risk, servicing rights

Earnings against the risk come:

• Types of quality of income: net interest, trading, fees, commissions, gain on sale etc.

• Impact of earnings accrual and asset impairment policies (loan losses, mark to market, write downs and etc)

• Ratios used to measure performance, cost control and provision burden

Companies’ Financial Risk

The financial risks are different types as per the funding sources required.

• Asset and liability management

• Securitization: understanding the impact on earnings, assets and capital of off balance sheet funding vehicles

Capital adequacy

• Types of capital: ordinary and preference shares, subordinated debt; BIS regulations for banks

• Ratios to measure capital adequacy.

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