a. Bankers must always keep the goal of loan workouts firmly taking into consideration the worst case scenario.
b. The rapid detection and reporting of any problem with a loan are essential; delay often worsens a problem loan situation.
c. The loan workout responsibility should be separate from the lending function to avoid possible conflict of interest.
d. The concerned credit officer should confer/discuss with the troubled borrower quickly on possible options especially for cutting expenses, increasing cash flow and improving management control. Develop a preliminary plan of action after determining the bank's risk exposure and sufficiency of loan documents, especially any claim against customers’ collateral other than that held by the bank.
e. Estimate what resources are available to collect the troubled loan including the estimated liquidation values of assets and deposits.
f. The bank's credit personnel must evaluate the quality, competence and integrity of the current management and visit the site to assess the borrower's property and operations.
g. Bank's concerned credit specialist must consider all reasonable alternatives for cleaning up the troubled loan, including making a new, temporary agreement if loan problems appear to be short term in nature or finding a way to help/ cooption of strategic partner the customer strengthen cash flow or to inject new capital in to the business. Other possibilities include finding additional collateral, securing guarantees/undertaking/ to initiate the case of foreclosure.