Imagine a small business owner applies for a loan of Php 500,000 to expand her bakery. She has stable monthly revenues of Php 120,000 but inconsistent profits. What factors would you consider before approving or denying the loan?

Situation

In my internship at a rural bank, I assisted an account officer who was evaluating a similar micro-loan for a sari-sari store owner. The applicant had steady daily sales but weak documentation of expenses and existing debts.

Task

My task was to help the officer organize the financial information and evaluate whether the store's projected cash flow could support weekly amortizations without jeopardizing household needs.

Action

I created a simple spreadsheet that segregated personal and business cash flows, verified raw material receipts and supplier credit terms, and interviewed the owner to list all informal debts. I also visited the store for three days at different hours to observe customer traffic and estimated average daily sales, then computed a debt-service coverage ratio. Finally, I benchmarked her metrics against the bank's internal scorecard for micro-enterprise loans.

Result

The officer presented my analysis to the credit committee, and the loan was approved with a slightly lower interest margin and a requirement to open a business savings account. The client maintained a perfect repayment record for the entire term.