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ck and he/she has enough resources to convert them into cash to meet the obligations. Banks must check the status of income statement of the borrower. It is the prime factor before lending to be checked that borrower has the stable income. Financial capacity of the borrower is checked, to assure that he has the capacity to repay the loan with in time and without any pause.

With a standard credit check a financial lender can determine, the number of loans that were obtained and if they were fully repaid. A borrower with a history of making loan repayments on time is more likely to receive financing for their business than a borrower who irregularly makes payments or no payments at all.

In analyzing Capacity three items must be considered.

i) Stability

The stability of borrower is checked in terms of borrowers' employment in the field and income.

ii) Income Type

Income of the borrower should be checked. The nature of the income should be assured whether its commission based, wages or any other. Moreover many entrepreneurs have seasonal earnings that should also be considered while extending loans.

iii) Income Amount

Banks are mostly concerned with the expenses and revenue statement of Client. They do so because it gives the picture of the repayment ability of borrower after meeting its expenses. It shows that whether the earnings level will be able to meet monthly repayments. And banks should consider whether the prospective client's income decrease or increase and in what pattern.

III) Capital

Capital is looked at as the amount of money that borrower has invested in his own business. A financial lender or an investor may be curious as to why borrowers are seeking financial assistance before using their own assets. Many lenders or investors also want to know if they plan on using their money to help business succeed when needed. In addition to borrowers willingness to use their own equity, all financial lenders or investors may verify that there are assets to use. To verify the availability of assets, many lenders request a credit report or financial records.

The safety and viability of the project is closely linked with the share of borrowers' equity.

IV) Collateral

To ensure safety of advances, collaterals offered should be given due consideration. A loan is secured using the subject property as collateral. Since the property is the lender's protection against default, it must be structurally sound and functional. When evaluating the collateral bank must consider these conditions Property Type, Marketability and Readily Ascertainable.

V) Condition

Lender should make loaning conditions favorable to the borrower so that borrower could not default. Conditions consist of interest rate and term for financing. Secondly the bank should consider the purpose of loan required and should make it a condition in the contract which means what it will be used for.

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