Subject. Lending transactions always imply terms of lending for the bank and the borrower. Modeling lending processes, users can evaluate terms of lending transactions, efficiency of lending projects and the borrower’s ability to repay a loan. Objectives. I substantiate the approach to setting a financial model of the AIC lending so that entities could replenish their working funds. Methods. The study is based on general research methods, such as a systems and logic analysis and synthesis, principles of induction and deduction, techniques of higher financial computations. In the analytical part, we apply the balance sheet method, financial ratios, feasibility studies. The data were analyzed and summarized through the correlation of resultant and partial indicators, index method, factors analysis and forecasting. Results. I reviewed the existing lending methodology and methods that banks use for lending. The literature mainly focuses on the design, principles and distinctions of financial models for lending from perspectives of borrowers. In the proposed financial model, lending is viewed from perspectives of banks. The model describes terms of a lending transaction, computes banks’ earnings on interests under loan agreements, additional financial terms of loans. I suggest applying the technique for assessing the effective margin adjusted for predicted proceeds from the transaction and the loan balance. I outline a mechanism for using financial covenant to assure the borrower fulfill terms of the deal. Conclusions and Relevance. Computations will be made more accurately if the production and financial operations of the borrower is considered in the predicted period and the way they influence terms of lending. There should be a correlation among the financial position, cash flows and demand for loans. Banks can use the model to assess terms of lending transactions and make lending decisions.
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