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Small & Medium Enterprises

Access to Finance

Appendix A - Interview Questions and Quantitative Data

Bank Lending Practices to Small and Medium Sized Enterprises

PricewaterhouseCoopers

[ Last Updated 20 October 2005 ]

Interview Questions

General

1	How does the bank define the SME sector?
2	Can you describe the organisational structure within the bank, in respect of both credit and lending, as it applies to the SME sector
3	Could you please confirm your specific role, and responsibilities
4	What sort of data and statistical information do you collate on the sector on a regular basis. Can you provide us with a selection of sample reports?
5	Can you give us an overview of the bank's philosophy on the provision of banking products and services to this sector

Credit Risk - Policy and Procedures

6	Can you provide us with a copy of your Lending Policies as they apply to SMEs
7	How 'risky' do you think this sector is - can you talk about this generally?
8	Do you have detailed bad debt statistics on this sector, going back several years
9	Can you describe the credit approval processes for the main products and lending exposures in this sector?
10	Can you provide us with a copy of the delegated credit approval discretions in place within the bank for the SME sector
11	Do you risk grade exposures within this sector - can you provide us with the latest portfolio risk profile and if possible a series over several year ends
12	Does the bank utilise credit scoring techniques with any of its lending approvals to this sector.
13	Does the bank make any distinction in its lending policies to exposures in rural vs urban sectors or other regions size of entity age of entity/borrower ethnicity of borrower
14	Are there any SME sub-sectors which are considered by the bank to be higher risk, and where special lending criteria apply?
15	Does the bank have any portfolio exclusions, or limits which in any way restrict the granting of loans to this sector
16	What is the bank's policy on unsecured loans to this sector? Are all advances secured? What sort of security is taken?
17	What impact do PMSIs have on the bank's willingness to lend over stock?
18	How do banks deal with SMEs that are start-ups or have high levels of IP, and few fixed assets to use as security?
19	To what extent do you think the bank is a 'cash flow' lender, and if it does adopt that approach, what tools and techniques are utilised to assess ability to repay.
20	To what extent is 'home equity' a feature of lending to SMEs?
21	Can you describe the bank's credit management processes - i.e. annual review, account monitoring, excess/ default management, bad debts and provisioning, management of seriously defaulting accounts
22	How do you inform your customers of the success/failure to obtain loans? What reasons are given?
23	Are you aware of any differences in practices between New Zealand and other international jurisdictions?

The Front Line - Marketing the Banks Products and Services to the SME Sector

General

24	How does the bank define the SME sector
25	Can you describe the organisational structure within the bank, in respect of both credit and lending, as it applies to the SME sector
26	Could you please confirm your specific role, and responsibilities
27	What sort of marketing data and statistical information do you collate on the sector on a regular basis. Can you provide us with a selection of sample reports?
28	Can you give us an overview of the bank's philosophy on the provision of banking products and services to this sector?

Products and Services

29	Can you provide us with documentation that sets out the various products and services the bank provides to its customers in this sector?
30	Can you explain your marketing philosophy in terms of the SME sector? How important is this sector to you? How profitable is the sector? How risky is the sector?
31	Can you explain, in some detail, the pricing methodology that is applied to loans and advances to SME customers?
32	Do you utilise a standard 'NIACC" or Risk Adjusted Pricing Tool?
33	What sort of default parameters are utilised for advances to SME customers. Do these parameters depend also on the nature of the security held?
34	How competitive is the market? Can you provide any examples of transactions that you have bid for on a competitive basis, and lost?
35	Which sub-sectors within the SME sector are particularly attractive
36	Which sectors do you find the most difficult - for example obtaining of credit approvals?
37	What is your experience of the accuracy, substance, comprehensiveness and professionalism of the information supplied to you by SME clients, particularly at annual review time, and for new loan applications?
38	What information do the banks request? What information requests by the bank do SMEs find difficult to furnish?

Managing Clients

39	How do you structure the actual customer interface, and the management of the relationships - at all levels within this sector.
40	Are these relationships and responsibilities structured on size of advance, size of company or other criteria?
41	On average, how many clients would a typical relationship manage have responsibility for.
42	For those clients without a designated relationship manager, how does the bank manage that customer interaction? Discuss the extent to which those managers, or bank officers have sufficient time to develop a 'relationship', or at the smaller entity level.
43	How is this interface handled in the rural areas, as against the larger urban centres?
44	Are there any particular sectors where the bank might have a dedicated sales team
45	What new products have you brought to the market to target SMEs? If so, why? Are there any products/services you are anticipating bringing to market in the future?
46	What is the driving force behind moving focus to the SME sector?

Economic Efficiency

47	Are there any initiatives your bank has put in place to improve the efficiency of lending to SMEs
48	What opportunities do you see for improving bank lending to SMEs?
49	How is competition in the sector likely to affect the attractiveness of lending to SMEs?
50	What impediments or barriers do you perceive there to be to the financing of SMEs?
51	What future strategies do you have in relation to SMEs?
52	In an ideal world, what would you see happen to improve the efficiency of SME lending in NZ? Is there anything the banks could do in conjunction to improve efficiency? Share information Technological advancements
53	Are there any legislative regulations/policies that make lending to SMEs difficult?
54	What inefficiencies, such as information asymmetries, exist in SME lending
55	What, in your opinion, would constitute market failure in the area of bank lending to SMEs?
56	What could the government do to facilitate improvements in lending to the SME sector

Questionnaire

Customer Data

		Year
		2002	2001	2000	1999	1998
1.1	Number of Customers by FTE: less than 5 employees between 6 and 9 employees between 10 and 19 employees between 20 and 49 employees larger than 49 employees
1.2	Number of Customers by Revenue: less than $500,000 between $500,001 and $1,500,000 between $1,500,001 and $3,000,000 between $3,000,001 and $8,000,000 greater than $8,000,000
1.3	Number of Customers by Industry: Agriculture, Forestry & Fishing Technology Retail Trade Manufacturer Mining Electricity, Gas & Water Construction Wholesale Trade Accommodation, Restaurants, Cafes Transport & Storage Communication Services Finance & Insurance Property & Business Services Government Administration Education Health & Community services Cultural & Recreational Services Personal & Other Services
1.4	Your classification and count of business customers Small ____________________ Medium __________________ Large ____________________

Loan Portfolio

		Year
		2002	2001	2000	1999	1998
2.1	What % of your loan portfolio is with SMEs?
2.2	What is the maximum % of your loan portfolio that can be allocated to SMEs?
2.3	What is the average amount of finance per SME?
2.4	How many SME customers borrow amounts of: Less than $25,000 Between $25,000 and $50,000 Between $50,000 and $100,000 Between $100,000 and $500,000 Greater than $500,000
2.5	What proportion of financing offered to SME's is in: Overdraft facility Short term Loans (0 - 1 year) Medium term Loans (1 year - 4 years) Long term Loans (4 years +) Other ____________________ Other____________________
2.6	What proportion of financing offered to all business customers is in: Overdraft facility Short term Loans (0 - 1 year) Medium term Loans (1 year - 4 years) Long term Loans (4 years +) Other ____________________
2.7	What interest rate premium is charged, relative to established companies, for: SMEs with no track record (ie start ups) SMEs with no collateral SMEs with a track record and collateral
2.8	Are interest rate premiums higher for any particular industry? If so, how much? Industry 1: ____________________ Industry 2: ____________________ Industry 3: ____________________ Industry 4: ____________________
2.9	What proportion of SME lending is based on fixed term interest rates (by volume)?
2.10	What proportion of SME lending is based on variable term interest rates (by volume)?
2.11	What proportion of all business customer lending is based on fixed term interest rates?
2.12	What proportion of all business customer lending is based on variable term interest rates?
2.13	What proportion of SME lending is backed by collateral (by volume)?
2.14	What proportion of all business customer lending is backed by collateral?

Operational Aspects

		Year
		2002	2001	2000	1999	1998
3.1	How many applications do you receive from SMEs per year - start up companys?
3.2	How many applications do you receive from SMEs per year - non start up companys?
3.3	How many applications do you accept from SMEs per year - start ups?
3.4	How many applications do you accept from SMEs per year - non start ups?
3.5	How many SME applications are rejected because of: Credit scoring result Lack of collateral Inadequate business plans, cash flow forecasts Lack of experience/management knowledge Lack of contribution by entrepreneur Other ____________________ Other ____________________ Other ____________________
3.6	How many SMEs that your bank financed defaulted on their financing?
3.7	How many business customers in total that your bank financed defaulted on their financing?
3.8	How many SMEs your bank financed went into receivership/liquidiation?
3.9	How many business customers in total that your bank financed went into receivership/liquidiation?
3.10	What was the level of bad debts ($000s) resulting from SMEs?
3.11	What proportion (%) of your total bad debt figure was from SMEs?
3.12	What is the average length of relationship with SMEs?

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Printed: 26/11/2009