The importance of due diligence in lending to companies
It is a concept that has caught on, and rightly so, in the financial world and in business in general. Due diligence is essential when lending to a company because it helps the lender assess and understand the risks associated with the transaction.
At DEXTER, this process is carried out internally, corporately, and aims at: 1) financial risk assessment, analysing the financial health of the borrowing company, reviewing its financial statements, cash flows or existing debts to identify potential problems and anticipate risks of default; 2) examination of the viability of the business, according to its strategy, its model, that of the competition and other factors that may affect its ability to meet the loan obligations; 3) verification of legal and regulatory compliance, ensuring that the company complies with all relevant laws and regulations, something that entails the review of contracts or possible pending litigation; 4) operational risk management analysis, assessing the efficiency and robustness of the company's operational processes to identify potential vulnerabilities arising from its day-to-day operations; 5) examination of the company's own leadership, getting to know its key managers and its structure, so that there is maximum assurance that the experience, skills and capacity of the borrower's management team are available.
The Director of DEXTER's Risk Analysis Department, José Enrique Chasserot, with more than twenty years of experience in leadership positions in financial institutions, concludes: "due diligence is, in short, an exhaustive and indispensable examination to approve a loan, even more so when the operation is articulated with a corporate guarantee than when it is carried out with a mortgage guarantee. A lender must always make informed decisions and seek to ensure that the transaction is beneficial to both parties," concludes Chasserot.
The importance of due diligence in lending to companies
It is a concept that has taken hold, and rightly so, in the financial world and in business in general. Due diligence is essential when granting a loan to a company because it helps the lender to assess and understand the risks associated with the transaction.
At DEXTER, this process is carried out internally, corporately, and aims at: 1) the financial risk assessment, analysing the financial health of the borrowing company, reviewing its financial statements, cash flows or existing debts to identify potential problems and anticipate default risks; 2) the examination of the viability of the business, according to its strategy, its model, that of the competition and other factors that may affect its ability to meet the loan obligations; 3) the verification of legal and regulatory compliance, ensuring that the company complies with all relevant laws and regulations, something that entails the review of contracts or possible pending litigation; 4) operational risk management analysis, assessing the efficiency and robustness of the company's operational processes to identify potential vulnerabilities arising from its day-to-day operations; 5) examination of the company's own leadership, getting to know its key managers and its structure, so that there is maximum assurance that the experience, skills and capacity of the borrower's management team are available.
The Director of DEXTER's Risk Analysis Department, José Enrique Chasserot, with more than twenty years of experience in leadership positions in financial institutions, concludes: "the due diligence is, in short, an exhaustive and indispensable examination to approve a loan, even more profound when the operation is articulated with a corporate guarantee than when it is carried out with a mortgage guarantee. A lender must always make informed decisions and seek to ensure that the transaction is beneficial to both parties," concludes Chasserot.
