Delivery in day(s): 3
FNS50315 Finance and Mortgage Broking
The key people who are involved in the loan process application are Ray and Steve, they are the partners of the business who are looking for expansion of the current business and economices. For this very reason they are seeking the loan. It is identified that the expected loan value is $500000 and this loan will be mainly applied for purchasing the assets to aid in expanding the operations of the business.
Security for the loan
The partners have agreed that the assets which are procured through the loan will be kept as security. However, the partners need to pledge other assets as security, this is because the security should be more than the loan value. Since the value of the assets purchased through the loan is equal to the loan amount, the partners should focus in keeping more assets as loan security.
Facility of the business
Ray and Steve are the partners of the business and they together the perform the business operations of running the transport firn. It is noted from the case study that the business is possessing large client and they are scattered in different sectors.
Details of the lender pertaining to the loan
The partners has received new contracts for their business and in order to plan for the expansion of the business, the partners are looking for getting equipment finance for purchasing vehicles and use them for their bsiness. So, the partners has decided to form a new company called Henman Holdings which will procure the assets and then will be hired back to the transport company of Henman. The loan is being sought for 500000 and the partners are seeking to use them for purchase of the assets.
Confirmation of the loan
The loan is being applied and the confirmation on the loan is yet to be received. However, the partners are confident that the loan will be get confirmed.
Personnel in the organisation
The company is currently managed by the partners – Ray and Steve, the firm also possess 1 accountant, financial advisors and other solicitors.
Basic responsibilities of the individuals
The basic aspect of the partners is to manage the overall process and operations of the business, the partners are willing to provide the necessary document for the loan documents and they will adhere to the rules as stated by the lender.
The business was started with a seed capital of nearly 500000, the business has various clients and is spread across various sectors, the clients pay the company within 30 days. The business performs clear and concise checks on the new business before accepting the orders, this is to avoid any adverse issues.
Timing to repay the loan
The Partners Ray ad Steeve has decided that the total loan value with the interest will be repaid within 4 years. The company expects that the business will expand considerably and the business will generate more cash reserves which will be used to repay the loan.
The basic documents which is required for the loan application is the registration copy of the partnership firm, the partnership deed, financial statement of the firm for the past 3 years, agreement between the Henman Holdings and Henman Transport company, current value of the assets owned by the firm, outstanding debt of the company, personal assets of the partners etc.
Based on the case study provided it was identified that the business will pay the interest for the loan of 500000 at 6% per annum and the partners are looking to payoff the loan in 4 years.
Based on the given case it is noted that the main applicants for the loan is Henman Tranpsort Pty ltd which is currently maaged by Ray and Steve. Ray has completed Masters in Busines,, where Steve possess distinct qualification in marketing. The partners are the key decision takers and who also manages the overall performance of the business.
Henman transport compay is mainly involvd in providing fleet services to the customers, the business was started with the initial capital of 500000 and the company is in the busines for nearly 3 years, but they managed to get more clients who are spread in various regions, the company performs detailed background checks before agreeing on with the new customers, also the payment credit offered to the customers is 30 days, which makes the business to hold only less working capital.
The company is getting new orders from the clients and the existing assets is not sufficient to expand the business operation management, therefore the partners is finding ways to purchase more assets like vehicles. This requires additional capital, therefore they are looking to apply for loan to a tune of 500000 for purchasing the assets which helps in expansion of the business.
The company is looking ways to increase the scalability of the business, since they are mainly involved in the transport business the management is looking to add more vehicles which is important to attract new customers and accept new orders. The business is currently having positive cash flows which is useful in repaying the loan.
Current Funds position
The current financial position of the company can be categorised as the assets which consists of plant valued at 35000, the 1st year profits were at 240000 and in the 2nd year the profits has grown to 358000, the current year sales is more than 1.1 million and the net profits for the 10 month period is at 500000. Moreover the company has got the initial loan of 500000 with a guarantee of 45000 per annum and the principal needs to be repaid at 100000 per annum. From the case study, the financial position of the company can be described in detail as follows.
The company has registered strong income and net profits from the 1st year of operations, the company registered the profits of more than 240000 , which is more than 40% of the total sales. In the 3rd year the company registered profits of more than 500000 with sales of 1.1 million. The company holds cash of 25000 and debtors worth 220000, however the company has claims of more than 100000.
The company holds rich cash reserve and debtors in the balance sheet, moreover, the company tends to keep the assets which is purchased on loan as security with the financial company.
Overall risk assessment
Based on the case study, it can be inferred that the business is still in the introduction stage, the company is in the transport business for less than 4 years, the partners has already invested 500000 and possess financial commitment of 45000 per years and principal repayment of 100000 per year. Though the partners have agreed to keep the assets which is procured through the loan as security, it cannot be sufficient. Therefore the financial company need to look for additional security from the partners.
It can be recommended that the lender can accept the loan application and can offer the loan to the business, however it is subject to getting more security and personal guarantee from the partners apart from the assets which is agreed to be kept as security.
The first aspect to be noted is to comprehend the overall nature of the business and the services which the clients require. It is the responsibility of the broker to understand the key requirements of the client and offer the needed services in the best possible manner. The broker need to actively have a conversation with the client in order to gather needed details of the customers, the broker need to ask relevant questions which will enable in analysing the key purpose of applying the loan, the terms and conditions which the customers are comfortable with, the current financial commitments and the disposable income which the customer possess for making loan repayment, the details of the family members, assets owned by the client etc. The brokers should keenly involve in having cordial relationshp with the prospective clients and need to disclose all the terms and conditions to the customers, this will enable the client to have a mutual trust and coordination between them. The broker can use standard interview methods like filling in questionnaire or taking notes of the meeting etc, which will make them to understand the queries of the customers and address them in a proper manner. (Corby, 2013)
The broker needs to use traditional and modern techniques for gathering the relevant information from the client. The broker can have standard template for noting the key points discussed from the meeting with the client. The broker can carry notepads or laptops or other electronic devices so as to note down the key points of the meeting with the client. The broker need to specify the data and the time of the meeting, the point discussed and agreed during the meeting and the outcome of the meeting can also be noted for taking effective actions. The broker can use various colour themes in deciding the outcome of the meeting for example: the green colour can denote that the deal is completed, the amber / yellow can mention about the further clarifications is required and the red colour can note that the business dealings is cancelled. The broker can use technology like gotomeetings, skype and other technology tools for conducting meetings with the clients who are not located in the nearest place of business, also the presentations to the clients can be made through powepoint presentations, project report can be presented through word document etc. These tools will help the broker in servicing the clients in a better manner.
It can be stated that the responsibility of the broker is to identify the specific needs of the customers and address them by offering proper solutions to the customers. If in case the requirements of the customers are highly complex, then the broker can look to use a mediator who are mainly involved in understanding the specific needs of the claims, analyse the requirements and offer necessary assistance which is inline with the company policies and procedures. (Graham, 2014). If in case finding the solutions tends to be more complex then the broker should consult with the senior team member before conveying the same to the customers. The broker need to make thorough investigations of the needs and requirements of the clients and should create solutions which are mainly according to the standards as set forth by the regulators. The analysis is mainly involved to understand the opportunities in providing the best services to the applicants of the loan and overcome the challenges which may arise in servicing the loan. The broker should understand the cost and benefit analysis before providing the best solutions to the customers.
The broker should be analyzed depending on the interaction with the requirements in the risk assessment process. The broker is based on the quality of quality customers for effective treatments. Review is a process that analyzes the customer and revenue in detail, affecting the loan processing. Risks related to operational risk, legal risk, credit risk, etc. Credit risk is that the customer can not pay the debt. The agency can provide a detailed assessment tool, which early in money or knowledge of the business strategic department. The organization needs of the evaluation process, customer needs and the issues that can be obtained from the supplier. The broker must understand the entire loan process analysis should include opinions from interested parties and other information risk analysis. if the headquarter shall include existing reports and due diligence. (Hartman-Glaser, 2012). It should be noted that the broker's responsibility is to understand customer requirements based on the customer. For this purpose, the broker should clearly assess each risk candidate aspect and properly offer them an appropriate loan amount.
The broker is fully discussed with the customer to understand the benefits and the risks of risk being affected by many factors. Customer costs and expenses must be understandable and clearly informed customers. The broker must check the terms of the lender to ensure compliance with laws and regulations. The organization should consult user documentation and other professional groups, such as designers, auditors, lawyers, etc. The broker needs strong communication and needs to clearly analyze the customer's needs, assess the benefits and disadvantages of the treatment
The broker should carefully consider the documents submitted by the client and the broker must meet if the documents are clear or if additional requirements are necessary. The broker must handle problem customers in difficulty. Legal requirements must meet the customer's loan request. The broker must inform the customer that the various documents are needed and if additional copies broker must determine the same for customers. In addition, administrators must be required to read the document as he tries to ensure that the client makes a proper amendment of the document. This will help you to handle a clearer and better method.
Based on the overall analysis it is identified that the debt service coverage ratio has increased from 2014 to 2015, this means that the company has increased its capacity of servicing or paying the loan. So, the business can take steps in purchasing new vehicles through loan. Furthermore, it is expected that the total revenue of the firm tend to increase as the vehicles will be used to enhance business operations which will be used to service the loan.
Different type of trusts
A unit trust is stated as the association of people which is created with the basic purpose of investing the money from investors in smaller values and then tends to invest in the securities, te retrurns will then be distributed among the investors based on the deed which is agreed between the investors.
- Under discretionary trust the quantity of share for investors will be unchanging as per the prudence of the trust
- This kind of trust is a combination of unit and discretionary trust
- In case of the discretionary trust the trust basically holds the assets of the family members.
- The trustee is confined as the group of people who has been allocated with the duties and responsibilities for administering the assets which is mainly held by the trust.
The main differences among the trust are stated as follows:
Unit trust is stated as the allocation of the assets based on the investment made by the investors, on the other hand the discretionary trust is where the shares are being allocated by the trustees on discretion, whereas the hybrid is the combination of both which gives the investors the advantage of unit trust and discretionary trust.
Examples: Harding Loevner, David Garry & Associates, Inspireca etc.
It can be broadly stated that the company is considered as a legal entity which is different from the members who are operating them, the company possess clear entity and need to be registered under the Act of 2001, moreover the taxation is mainly based on the PAYG and other legal requirements.
The board of director need to act for the benefit of all the stakholders this is confined to benefit all the people like employees, customers, suppliers, government, communities etc. the director need to perform the duties which is fiduciary in nature and should not involve in any wrong doing which affects the business and other stakeholders.
On a general parlance, not all individuals can be able to become a director for any company, a director must hold a high level qualification to manage the business, he need to have extensive knowledge of the business and relevant experience which enables them to manage the affairs of the business, the director must be elected by the shareholders in the AGM.
The public limited company can have a minimum of 3 directors
A balance sheet is a statement showing the value of the assets and liabilities of the business, the assets are considered as the value of fixed and current assets which the company owns and the liabilities are termed as the payments which the company owe to others.
Profit and loss accounts states in detail the total income generated by the business and the expenses incurred for managing the business. All the stakeholders are interested to know the profit or loss of the company and the financial position to measure the current situation of the organisation. Based on the usage of the assets the overall value of them will decrease based on wear & tear, usage etc, so the company need to charge the depreciation in order to find the true value of the asset. Quick ratio is stated as the ratio between the quick assets, which is current assets excluding stock and the current liabilities. Current ratio is measured as the liquidity of the company is the ratio between the current assets and the current liabilities.
- The debt equity ratio is stated as the proportion of debt and the equity of the capital of the business.
- The cash flow statement is stated as the total cash inflows of the business and the outflows.
- An assets of the company is stated as the value which the business owns
- A liability is considered as the outstanding which the company need to owe.
- A net profit is considered is stated as the total revenue deducted from the total expenses.
- Share is stated as the proportion of ownership in the company
- The main expenses which are deducted are wages, power & electricity, depreciation etc.
It is noted that the commerical bills are mainly applied by the seller of the product towards the buyer based on the value of the goods which is dispatched to them, these commercial bills need to be paid in the short term which ranges between 30 to 90 days.
Based on the case study it is identified that the business may sell the accounts receivable to another person who mainly discounts them at a given rates, the banks can also take steps in collecting the outstanding debt from debtors who need to pay their dues. This type of mortgage is mainly implemented on movable assets. This kind of financing is applied by the organisation for business recovery, this kind of policies can enable in increasing the cash flow of the organisation and also involve in reducing the working capital investment.
- Creates and Protects the Value – The basic aspect of the standard is to create and protect the organisational value
- Tailor made – The standards which is stated is not fixed and the organisation can make it suitable based on its requirements
- Process – The standards are created in such a way that it will be an integral part of the organisational process
- Decision making – The standards will support the management in taking key decisions
- Factors – The standards will consider the human and other social factors into account
- Uncertainity – This intends to adrress the uncertainity in an explicit manner
Assessing and classifying risks is essential for the organization to take action to effectively manage the process. Operations are achieved through various aspects and very important for reference development, aimed at achieving attention and decisive leadership in achieving business goals and goals. It is very important to recognize the risk classification, as they are still classified to adapt to the organization and business. It should also be noted that the risk is considered internal and external. In the table taking into account analysis of the industry, several factors related to the cycle of life and social factors are detailed. From the point of view of the external environment, etc. These sections provide a detailed understanding of the various risks that the company faces and management measures to address the risk for the best and most effective. The categorization of risk is done by analyzing the causes that cause, which indicates risk, as the availability of fewer suppliers makes the most critical organization for smaller raw materials. Understand that the main purpose of risk categorization is to avoid the harmful effects of agriculture. It also aims to provide a reliable and consistent structured approach to identifying risks.
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