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Finance and Mortgage Broking Management Proof Reading Services
Assignment1: Loan Submission
The following case is concerned with the formal loan submission of client to the lender which will result in obtaining the loan or finance for purchasing the land required for real estate business. The client wants to acquire 3000m of land and for the same purpose a loan submission report will be prepared which will contain the information about client, nature and work of his business, financial management of the client. The client due to the policy of ABZ Bank requires an alternative lender to refinance their ABZ bank loan and obtain the required additional funds for the purpose of business.
Andrew Bisset is the real estate agent who has been working from the last 20 years Owning 6 shops at 55 Park Road, Belmont. There is his wife having joint ownership in his business and they together own the shopping centre under Bisset Family Trust. The personal details of both of them are as under:
Andrew Bissset– Andrew Mark Bisset having the birth date 29/07 1965 (DL # 2945758)
Jane Bisset– Jane Elizabeth Bisset having the birth date 15/06 1967 (DL # 2786454)
Both of them are married to each other having three adult children’s one of them is working in the real estate business. The residential address is as follows - 12 Currumbin Close, Carindale QLD 4152
Andrew Bisset is working as a real estate agent from the past 22 years in Brisbane South East Asia and he has the special experience in commercial and industrial property works related to real estate agent. He has the gross salary of $78,000 in the last financial year and He has drawn $55,000 from the partnership with Joseph Hooper last financial year.
Jane has been working as a property manager until Bisset Real Estate Pty Ltd. Took over the agency after the partnership business. Het last salary was $43,000 but she did not work for the previous financial year.
The purpose of the loan is acquisition of a land for building a shopping centre. Both of them including Andrew and Jane ants to acquire 3000m of land just near the shopping centre they own and want to hold it for 1-2 years. The land was previously utilized for the purpose of State Government Health and Dental Care After which the Building as demolished and presently the land is recognized in special Purpose Zone but the local council earmarked it for future commercial use. The land will be purchased in the capacity of trustees of family trust.
The existing facility states that Bisset wish to raise 100% of their finance with the stamp duty in security of which the\y are ready to offer both the existing land and shopping centre. As per the policy of ABZ Bank they can’t extend the loan against the special purpose Zone vehicle and therefore alternative lender has to be introduced and identified. The current existing interest rate in the market is 7% for obtaining the commercial loan and 9% is for the overdraft facility extended by the bank.
The existing fund position of Mr and Mrs Bisset is that they require purchasing the land whose purchase price is 600000. The funds are required to finance 100% of the amount of land together with the stamp duty charges of 25000 and financing and conveyance cost. For the same purpose existing land and shopping centre will be offered as a security. Also another additional contribution of 20000 will be made in 1-2 years for covering the cost associated with rezoning of the property and for obtaining the approval for construction of another shopping centre on the land acquired.
The financial position of Bassets real Estate Pty Ltd. For the last financial year is -
1.Gross revenue = $ 346,000
2.Net profit = $ 72,000
3.Depreciation = $ 14,000
4.Directors remuneration = $ 11,000
The real estate business has been formed and incorporated last year only. Earlier it was carried on by a partnership firm in which Andrew Mark Bisset and Joseph Hooper were the partners. The financial analysis for the partnership firm for the last financial year were as follows-
1.Gross revenue = $ 422,000
2.Net profit = $ 84,000
3.Depreciation = $ 16,000
4.Directors remuneration = $ 11,000
The financial information of the shopping centre for the last financial year is presented below. The same was acquired by the Bisset family trust 18 months ago.
1.Gross Rental income = $ 138,000
2.Loan Interest = $ 52,000
3.Management Fees = $ 11,000
4.Net Profit = $ 50,000
5.Depreciation = $ 25,000
Financial Position of Andrew Mark Bisset and Jane Elizabeth Bisset are as follows:
1.House at 12 Currumbin Close Carindale QLD = $ 560,000
2.Share Portfolio (Blue Chips Listed Shares ) = $ 345,000
3.Motor Vehicle = $ 60,000
4.Furniture = $ 85,000
5.Cash at Bank = $ 45,000
1.Home loan with ABZ bank = $ 190,000
2.ABZ Bank Credit Card = $ 10,000
Financial Position of the Bisset’s Real Estate Pty Ltd is as follows:
1.Business goodwill = $ 250,000
2.Plants and Equipment = $ 35,000
3.Debtors = $ 30,000
1.ABZ Bank Overdraft = $ 25,000
Risk Assessment and Management
There are various types of risks and factors which are associated with obtaining the loans from any financial institutions. The management should carefully assess and mange those key risk factors in order to manage their funds efficiently and effectively.
In the given case Andrew Bisset and Jane Bisset should consider each and every aspect of the risk associated for obtaining the loan for acquiring the loan.
1.The rates of interest should be properly analysed and considered before obtaining a loan which will include making decision about fixed or fluctuating rate of interest. The interest rate of 7% is available for commercial purpose of loan and this should be compared with market rate on interest so that appropriate interest rate can be obtained.
2.Another risk factor in this loan submission is that the land under consideration for acquisition is special purpose zoned and the same will be rezoned for commercial purpose in future. But that creates a risk for the company that the funds utilized for the purpose of acquisition will be waste if it cannot be converted into commercial zone after acquisition.
Here are some of the attachments required to be submitted while applying for the loan to the bank:-
1.An application will be required in written stating the reasons for obtaining the loan and other necessary information.
2.The statement of financial position of company for the last three years.
4.Registration certificates of the properties offered for security purpose foe ensuring the ownership of properties and assets.
5.Certificates for the assets and properties that they are not mortgaged anywhere else and free for security purpose.
6.Other information details as required by the institution or bank.