Loan Risk Assessment On Animal Feed Project For HUIZE Company By ICBC

As the domestic financial sector is continuously deepening reform and openingup in recent years, comprehensive risk management of commercial banks has becomeone of the most important ways to pursuit of sustainable development and createcompetitive advantage. Regarding to loan applications by the customers, the bankneed not only to consider its own consolidated income, on the other hand also toconsider credit risk more. Loan assessment is the mainly sector that the bank lendingdecisions based on. According to banks’ requirement of efficiency, safety andliquidity under the loan request, using the combination of quantitative and qualitativemethods, thorough and systematic assessment of loan provides objective, fair, andaccurate decision basis.Shandong HUIZE Farming Science&Technology Co., Ltd.(HUIZE) is aleading enterprise in Shandong province engaging in agricultural product deepprocessing, and was honored as municipal leading enterprise, and green productionbase of uncontaminated agricultural products at the provincial level. The company’sfeed products in brand of “QiLu” based on natural herbs and probiotics ingredients,having been used to feed chicken and duck, truly pure green residue-free,hormone-free, the quality meet EU import standards, can be achievable upgrade andupdate. The project complies with the national industrial policy of support anddevelopment of agricultural and sideline products processing industry and creditpolicy. This article based to the company’s annual350,000tons upscale animal feedline project as research object, in the loan banks’ angle, assesses the situation on construction scale, construction conditions, project technology, claims debt ability,cash flow and investment income, and makes risk analysis and development forecastfor this company from market and financial analysis. Meanwhile author made somerecommendations on company using fixed assets loan project in order to prevent loanrisk while implement company’s economic income and social benefit.The research methods adopted by this article as the following: first is acombination of quantitative and qualitative analysis methods, mainly for quantitativeanalysis; Second is combined with market research and financial analysis methods.through the company’s upstream and downstream market survey with analysis offinancial indicators of the company for three years, clearly know the company’soperating conditions; Three is based on a combination of theoretical research andpractical method. Through the existing loan project evaluation theory research inChina, combined with the characteristics of the this project, the author will describethe evaluation methods used in this article.This article has assessed on the financing feasibility of this project, relying onthe feasibility research report provided by the authority concerned to three aspects onfinancial index evaluation, non-financial index evaluation, and credit risk integratedevaluation, and confirmed that the project is under conditions for implementationafter finished project analysis such as construction necessity, technology conditions,production conditions and market situation etc. Through legal and financial indexanalysis of production operations, the financial indicators are improving, its assetsand sales have maintained a good developing trend, its asset-liability ratio is lower,profitability is stable, with strong long-term debt servicing capacity. Main potentialrisks for the project may occur in term of the cost control risk due to the fluctuatedprice of raw materials such as corn, soybean; marketing risk; competition risks fromother large feed companies such as LIUHE and HEMEI.Through the benefit and risk assessment of the project, came to the following conclusion: HUIZE project conforms to state or industry development plan and meetsrequirements of environmental policy. The project also matches with thedevelopment of agriculture within the regional economy plan and promotes eachother. The project received strong support from local governments, project site isappropriate, easy access to raw materials, it will spur local economic development,also made good economic benefits after the completion of the projectThe project loan for HUIZE are now released, and the company has been putinto operation stage. This project loan is not only given the support for company’sdevelopment, but also brought considerable economic benefits for the Industrial andCommercial Bank of China.