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FNS50315 Finance Mortgage Broking Management Proof Reading Services
Assignment 1: Loan Submission
Lender submission document
This document is to be submitted to the financial institution/bank/lender for the purpose of making an application of loan on the behalf of Mr. Andrew Bisset and Mrs Jane Bisset. The information contained in this document is complete and true to the knowledge of the applicant. The personal and income details of the borrower and his family are included in this document. Also the business details and properties in possession are also specified. The purpose of loan, financial position of the applicant and the security and risk management description is also made (Porter, 2016). The enclosures attached to this document are also listed at the end of the document.
Personal details –
1.Full name – Andrew Mark Bisset
2.DOB - The birth date is 29/07/1965.
3.DL - # 2945758.
4.Gender -The gender is male.
5.Marital and family status – He is married with Jane Bisset and they both have three adult children out of whom one works with him in his real estate business.
6.Address - He lives at12 Currumbin Close, Carindale QLD 4152.
7.Accountant - The accountant of his business is Ainslie and Partners Telephone ? 07 3349 9999.
Property details – He possesses the ownership of 6 shops located at 55 Park Road in Belmont. Along with this he is also the owner of a shopping centre in Belmont. However the shopping centre possessed by him is under the Bisset Family Trust.
Work Profile - He is the real estate agent working in this field for the period of more than 22 years. Bisset manages his business as a private limited company in the name Bisset’s real estate Pty Ltd and his office is operated in one of his owned shops. His business specialises in the commercial and industrial properties rather than residential properties since more than 75% of rental revenues comprise of commercial and industrial sale of properties. His salary as the real estate agent during the last financial year was $78,000. He also worked as a partner with Joseph Hooper and from the partnership he withdrew an amount of $55,000 during the last financial year.
Personal details –
1.Full name – Jane Elizabeth Bisset
2.DOB – 15/06/1967
3.DL - # 2786454
4.Gender -The gender is female.
5.Marital and family status – She is married with Andrew Bisset and they both have three adult children.
6.Address - She lives at12 Currumbin Close, Carindale QLD 4152.
7.Accountant - The accountant of his business is Ainslie and Partners Telephone ? 07 3349 9999
Work Details – Jane works as the property manager in the Bisset’s Real Estate Pty Ltd. She started working with the company after the agency was taken over by Andrew against his partnership. Due to this reason she did not work in the previous financial year since the taken over was recent. Her last drawn salary when she worked was $43,000.
Property details – She owns 6 shops jointly with her husband in Belmont and also own shopping centre under Bisset Family Trust.
Andrew was earlier working as the partner in the real estate firm but recently he took over the agency of the business and is running the business as the private company. Andrew has good experience in real estate of 22 years and he also specialises in dealing with the sale of industrial and commercial properties. Jane is also working with Andrew as property manager. Bisset Family Trust earns income in the form of rent from the shop rented to Bisset’s Real Estate Pty Ltd. Apart from this Andrew also earns rental income from his properties.
The purpose of the loan for Andrew and Jane Bisset is to acquire a 3000 square metre land for the expansion of their business stock. The land is located near their shopping centre and therefore in order to increase the value of their business stock they intend to purchase the property. However the land is currently declared by the government as ‘Special Purpose’ but in the recent town planning scheme announced, the government allowed the land to be used for commercial purpose. They consider this as an opportunity for their business growth since they are planning to develop another shopping centre on such land. Mr. And Mrs. Bisset have already entered into an agreement for the purchase of property as the representatives of the Family Trust and the payment of the purchase price of $600,000 is to be made within the period of 60 days. The loan to be acquired will include the financing of 100% purchase price of the property amounting to $600,000. In addition finance will be required to pay stamp duty, financing and conveyance cost of $25,000, and thus total loan of $625,000 will be required to be financed.
The area of the land is 3,000 square metres. The land was previously owned by the government as State Government Health and Dental Centre but after it became obsolete it was demolished by the government and the land was marked as usable only for Special purpose by the government. The location of the land is in Belmont and the address is 423 Belmont Road. The land allows considerable passing traffic and occupies a two street frontage. However the local council has declared the land to be usable for commercial purpose in its recent town planning scheme but the rezoning will take next 1-2 years. The property is available for sale at the rate of $600,000 by the government.
Funds position –
The financial position of the assets and liabilities possessed by them and the income and revenues of their business is presented as follows:
Financial position of Andre and Jane Bisset
House at 12 Currumbin Close Carindale Queensland
Home loan from ABZ Bank
Share portfolio comprising of listed shares of Blues Chip
Credit Card of ABZ Bank having limit of $20,000
Cash at Bank
Financial Position of Bisset Real Estate Pty Ltd
ABZ Bank Overdraft with limit of $40,000 and also secured by their residential property
Plant and Equipment
Financial; position of partnership of Andrew Bisset and Joseph Hooper
Financial position of Bisset Family Trust
Gross Rental Income
Shopping centre with 6 shops
Mr. And Mrs. Brisset own a shopping centre at Belmont which was valued at $1,450,000 2 years ago. This property also has a mortgage bank loan amounting to $625,000. Apart from this, they earn a rental income of $96,000 from the five shops rented by them and earn annual rental income from the sixth shop amounting to $42,000 under their Family Trust. During the previous financial year Andrew earned a salary of $78,000 and also received partnership income amounting to $55,000 and the last drawn salary of Jane is $43,000.
As a security against the mortgage loan of $625,000 for the purchase of vacant land at Belmont on the behalf of Bisset Family Trust, along with the land to be purchased the shopping centre with 6 shops owned by Andrew and Jane Bisset on behalf of Bisset Family Trust will be provided as security to the lender.
Risk Assessment and Management
The procurement of mortgage loan from the lender for purchase of vacant land at Belmont there are some risk factors attached. These risk factors relate to the availability of the government land and the rate of interest. The risk attached to the loan process is explained as follows:
1.The rate of interest for a commercial loan is 7% per annum whereas the rate of interest for bank overdraft is 9% per annum. The procurement of loan with the; lender will comprise of the risk relating to the fixed and fluctuating rates of interest attached with the repayment of loan.
2.The vacant land to be purchased from the loan amount is special purpose zoned land which was previously held by State Government as State Government Health and Dental Clinic. However the local council declared the land to be commercial in its town planning scheme but the rezoning will still need 1-2 years. Thus the availability of the vacant land for commercial use is not ensured.
3.Another risk factor is the market value of the shopping centre. The valuation of the shopping centre was made 2 years ago and the present market valuation of the shopping centre will determine the servicing capacity of the shopping centre for the loan.
The property has been made available for sale by the government and therefore it is recommended to purchase the property by loan so as to avail the opportunity. Also it is recommended that the shopping centre can be used for servicing the loan.
The enclosures attached to this loan application are listed as follows:
1.Written application signed by Mr and Mrs Bisset in the representative capacity of Bisset Family Trust for the procurement of loan including all the details related to the loan such as loan amount, borrower’s details, security, finance position etc.
2.Financial Statements and financial records of the trust and the company for the period of past three years
3.Registration certificates and purchase deed of the properties mention in the application.
4.Certificate of ownership documents for their assets owned.
5.Valuation re[orts of assets and liabilities possessed by the business
6.Other information as required by the bank or the lender.
(Kazakova & Dun, 2014)
Assignment 2: Loan submission for Equipment financing
Need Analysis Fact Sheet
The clients are planning to grow their business by increasing their revenues through financing the purchase of equipment from bank. In order to execute the proposed transactions on the behalf of client many questions will be required to be asked from the clients (Mikic, et.al, 2016). The following is the list of questions to be asked for completing the need analysis process:
1.Who are the parties to the loan and what are their personal and income details?
2.Define the purpose and need of procurement of loan?
3.Define the financial institution or lender from whom the parties to the loan are likely to obtain loan.
4.What will be the amount of loan to be obtained from the lender?
5.What is the term period in which the parties to the loan will be able to repay the complete loan amount?
6.Please provide the information about the current loans, borrowing or any other debts in relation to the parties.
7.What securities can be offered by the parties as mortgage against the loan? Please provide the details about the nature and value of each security.
8.Do the securities so offered for the loan include any mortgage on any existing loan?
9.What are the sources of finance available with the parties in order to service the loan?
10.Through what source or form does the client intends to receive the loan amount?
11.What is the debt equity ratio and net worth of the business or company managed by the clients for earning income?
12.Provide the financial statements and tax returns of the business and personal tax returns of the parties.
13.What is the credibility of the financial statements and the other information provided by the parties?
14.Provide the details of cash flows and fund flows of the business so as to identify the cash management efficiency of the parties.
15.Define the signing authority for entering into the contract with the lender and procurement of equipment under financing.
Parties to the loan
The parties to the loan are Ray Henley and Steve Manning. They work together to carry on the business operated by a transport company which is owned jointly by both of them.
The security which will be provided by the applicants for the mortgage against the loan will the existing depot retained by them for their business purposes.
The equipment Finance limit is required to be established by them for $500k. From this amount the equipments to be purchased will include Truck and Dog Trailers.
The lender of the loan can be any financial institution whether it is a bank, financing company or some private investor.
Confirmation of the complex requirements of client
The requirements of the client include execution of the business contracts they have in hand in order to expand their business sin the near future. For the purpose of purchasing Trucks and Dog Trailers the equipment finance limit is required to be established at $500k. The purchase has to be made within the next 12 months. The term of the loan will be no longer or lesser than 48 months without any residual since they intend to pay off the debts as early as possible. Also, they will utilise the GST Input Credits in the form of additional repayments which will be incorporated in the loan structure which will be revised thereafter. They will form a new entity in the name of Henman Holdings Pty Ltd ATF the Henman Discretionary Trust and ill purchase the equipment on behalf of this trust and will be hired to Henman Transport Pty Ltd.
The persons involved in this loan will be the broker, accountant, applicants and the financial institution or lender.
Responsibilities of the client
The client will be responsible for the timely repayment of the loan and interest. He will also be responsible to provide the documents for mortgaging the security. He will be the signing authority of the purchase contract and the client will authorise the purchase of equipments from the loan amount. It is the responsibility of the client to supply accurate and timely information to the lender and the broker (Mach, et.al, 2014).
Process timing and client arrangements
The loan process will take the time period of one month from the supply of all the required information and arrangements from the client and after submission of the loan application to the lender the disbursement of loan will be in accordance with the policies of the clients.
The documents which are needed by the broker for the commencement of loan process and initiation of borrowings with the lender will include the identity of the clients to verify their personal details, business identity number of the client, financial statements and tax returns of client’s business for a period of past three years, loan application duly signed by the applicants and any other documents which will be required by the lender as per their policies and regulations (Cole & Sokolyk, 2016).
Signing authority for the contract to purchase
The signing authority of the contract authorising the purchase of equipment will be both the parties to the loan namely Ray Henley and Steve Manning. No party can sign on the behalf of other party.
The clients were referred by another commercial client for the financing of equipment in order to execute the contract of purchase. The meeting was conducted with the client in order to discuss their loan requirements and obtain other information from them to initiate the loan application to the lender
Loan submission document
This document is to be submitted to the lender for the procurement of loan by the applicants in order to establish the equipment finance limit of $500k which can be utilised by the applicants for the purchase of equipments for their business. The loan will be a business loan for the expansion of business of Transport Company owned by the applicant. This document contains the details of the borrowers, security to be provided by them, amount and purpose of the loan and the financial position details of the borrower (Sutherland, 2016).
There are two parties in the application to be considered borrowers for the purpose of loan. The details of the parties are as follows:
Ray has been working as the Financial Controller in many transport companies for a last few years and has a good experience of transport industry. His professional qualification is MBA. Ray is married but there are no dependants in his family on him. Ray’s wife is working as a school teacher and she will be retiring from the position at the end of the current year.
Steve also worked in many transport companies during the past years as financial controller and marketing manager. He holds himself a marketing degree which adds to his skills and his experience in the transport industry. Apart from this he is completing his HR degree at present which will enable him to manage the human resources of his business in an efficient manner. Steve is not married to anyone and he also has no dependants in his family.
Ray Henley and Steve Manning both jointly own and manage a transport company. The company is performing well and is growing successfully. The clients of their business are spread to a wider market in different sectors of industry. They have been trading through this company for a period of last 34 months, Both Ray and Steve have come out with a sound business plan and their plan is likely to exceed their projected sales and profits after implementation. They started their business with a capital investment of $500k which was financed by a private investor. This was an unsecured loan but personal guarantees were given and also the private investors was guaranteed a minimum return amounting to $45,000 per annum for the period of 5 years. This loan also involves a principal reduction of $100,000 every year.
Ray and Steve have a business expansion plan which will result in high increase in their revenues and profits. They intend to acquire business equipments including trucks and dog trailers within a period of 12 months and therefore they require establishing equipment finance limit of $500k. Thus the purpose of the loan is to acquire the assets for the business on finance.
Ray Henley – He has net income amounting to $100,000 which is paid to him as fully franked dividend. The details of assets and liabilities of Ray are as follows:
Owner occupied property
Debt with interest of 7.2% per annum
Credit card limit 25,000 with interest rate of 3%
Steve Manning – He has a net income of $100,000 which is also obtained by him as fully franked dividend. The details of assets and liabilities possessed by Steve are as follows:
Owner occupied property
Debt with interest of 7.2% per annum
Credit card limit 10,000 with interest rate of 3%
5 year debt on motor vehicle at the rate of 9%
Financial position of business
Cash at bank - $25,000
Creditors - $100,000
The equipment Finance limit is required to be established by them for $500k. From this amount the equipments to be purchased will include Truck and Dog Trailers.
Income of Ray Henley – Ray earns an income of $100,000 as fully franked dividend. He has a debt of $250,000 on an occupied property with rate of interest of 7.2% P&I. The principal and interest required to be paid on this debt amounts to $250,000*7.2% = $18,000. Apart from this he has credit card debt of $15,000 with interest rate of 3% amounting to $450. Thus the remaining income of Ray w8ll be $100,000-$18,000 - $450 = $81,550
Income of Steve – He also has an income of $100,000 received as fully franked dividend. He has debt of $350,000 on the occupied property with interest rate of 7.2% which will amp8nt to $25,200. The interest payable on his credit card debt of $3,000 is 3% amounting to $90. He has a debt of $ 15,000 on motor vehicle with 9% interest amounting to $1,350. Thus, the remaining income of Steve will be $73,360.
Income from business – They have leased their existing depot at the rate of $6,000 per month which will amount to monthly income of $72,000. They have a contract in hand which is likely to earn net profits amounting to 460,000 per annum. The average net profit from the business amounts to $240,000 + $358,000 + $506,000/3 = $368,000. The business also has GST Input Credits which can be utilised for the restructuring of loan and reducing the loan amount.
The existing depot of their business which has been leased can be provided as security by the applicants for obtaining the loan for equipment finance limit.
Risk Assessment and Management
Business risk – the business has a diversified client base which is spread over many sectors of industry. This marketing strategy ensures that they do not have any business risk with regards to loss of a particular market segment or customer (Petty, et.al, 2015).
Credit risk – The Company enters into contract with its suppliers and customers with a payment term of 30 days. With regards to all the new business prospects, background industry checks and credit history checks are performed so as to ensure that adverse issues do not arise in the future trading arrangements taking place (Hollander & Verriest, 2016). Thus there is minimum credit risk of business.
Debt risk –They have an unsecured loan amounting to $500,000 from a privet investor. However this loan has guaranteed return payable to investor for an amount of $45,000 per annum for the period of five years. This loan also has principal reduction of $100k every year. Thus the debt risk is high (Roberts, 2015).
Cash risk – The purchases from the loan will be made only when the additional contracts are entered into by the business or in case when the older equipment is replaced. Thus there is no risk in relation to inappropriate utilisation of funds of loan.
It is recommended to Steve Manning and Ray Henley that they shall provide their existing depot as security to the lender. Also it is recommended that the client shall consider the impact of various risks attached to the loan and make an analysis in order to prevent any threats to their financial assets and property.
1.Personal details of applicants with proof of identities
2.Details of business and stakeholders of business
3.Financial statements and tax returns of business for past three years.
4. Purchase contracts of equipments
5.Other information or document required by the lender.
1.Information to be gathered: The loan process includes a number of personal information which can be shared only by establishing a fiduciary relationship with the client. The client intend to procure loan and therefore the information to be gathered will include the information like reasons for acquiring a loan, professional life and salary package, wealth, personal life and information about close ones etc. These are information is critical for evaluation of loan processing system.
2.Listening and questioning: The information will be obtained from the client by designing the questions in relation to the loan details and obtaining the responses from the client. Face to face meetings, telephonic conversations will be employed.
3.Use of appropriate language: It is quite important that a broker maintains a good relationship with the client and must use significant linguistic so as to allow development of effective relationship (Matkovic, et. al., 2013).
4.Use of interpersonal skills for emotional issues: Development of fiduciary bond allows the client to communicate personal and professional communication. Thus, skills like soft communication, honest and transparent working etc.
5.Establish rapport: The development of the bond between client and broker can be made through eliminating cultural, linguistic, color or any other kind of barrier as done by the broker with Andrew and Jane Bisset so as to build a stronger relationship for sooth sharing of personal information.
6.Professionalism: The professional behaviour includes use of soft skills/ interpersonal skills, abide of code of conduct.
7.Communication skills: Communication skills must be clear, familiar linguistic, clarity in ideas, use of both written and oral skill are used, content follow up of communication process. There are number of communication instances such as: a client is eager to know about the benefits of the loan process, requisites to be fulfilled etc. and on the other hand, the broker is curious to know about the personal and professional information about the client (Matkovic, et. al., 2013). There must be two ways communication process (in case of limitation of languages sign language and postures can be used).
8.Contact with the client throughout the complex process: Brokerage service is indeed a complicated process which is majorly based on fiduciary and trust. For keeping contact with the client throughout the process are cellular, emails, meetings (Matkovic, et. al., 2013).
According to Root, (2014), Brokerage services and relationships are based on each other honesty and trust yet it becomes complicated at several times. Therefore, it is always better to record conversations as evidence for eliminating any possible future conflicts.
1.Templates to be used: There are innumerable measures which can be used for recording conversations such as templates, diarising, documentation, technology things, specialist software etc. Brokers will use pre-printed templates for recording personal and desired information of each client with specified questions. This information is used in future at the different time interval and these do not lead to any form of conflicts (Latimer, and Maume, 2015).
2.Diarising or recording: Documentation of things is the most simple and convenient way of recording conversation.
3.Procedure that is implemented for critical implementation: The first priority is to gather information and make ensure the best suitable loan process for the requirement.
4.Documentation gathered: various documents which must be gathered are tax returns, loan application doc, ID’s and personal information, etc.
5.Technology used: Technology or so to say computers and internet have become the most common way of recording information. There are various specialist software’s which can be formulated in a manner to record information associated with the loan processing mechanism. These can also be sent to client’s email for their record as well. Computers have high storage memory and thus can keep records for longer duration and can be accessed at any point in time. Microsoft Excel and spreadsheets are another easiest and simple method for recording a minute or detailed client information and can also be shared as and when requires. These recordings are also approved during any litigation or in front of legislation authorities. Thus, these can be used as proof or evidence at those points (Latimer, and Maume, 2015).
6.Access of specialist templates and special software: Through use of computers and internet, the specialist software’s are used.
7.Documentation of recommendations and loan structures: Brokers will also formulate pre-printed documents which contain detailed information varied loan structure and loan guidelines. They also formulate recommendations and suggestions documents which are highly useful for clients who look for a loan. The major information contained in these documents relates current available loan and their types, the basic requirements to be fulfilled for acquisition such loans, current interest rates to be applied and instalment calculation for repayment of loans and also contains penalties or damages to be faced in case of default of such loans (Latimer, and Maume, 2015).
1.Assessment of complex features of client’s: In the loan processing systems, every individual client has different need from each other. Since every individual’s social, economic, and cultural and other values are different from each other, therefore, their requisition for loans is also different from each other. Being a broker, it is extremely vital to evaluate the exact position of each individual client and to formulate beneficial loan structure for that particular individual (Briscoeand Rogan, 2015). Therefore the needs of the clients will be identified and evaluated in order to plan the loan procurement and settlement procedures.
2.Analysis of client situation for opportunities and constraints: Thorough financial information of the client’s provides vital information to judge the financial opportunities and constraint for the client.
3.Research for loan structure: there are different loan structures such as cumulative interest structure, fixed or flexible loan structure etc. in accordance with the individual’s requirement and information.
4.Consideration of financial issues: The major criteria where individuals differ are financial domain. In financial domain, clients look in for interest rates (fixed or floating), repayments installment, loan period, loan terms and conditions, the requirement of mortgages, wealth and status requirement etc. Different people like a businessman, students, professional persons, working people etc. require their loan structure to be formulated in accordance with the social and economic position (Briscoeand Rogan, 2015).
5.Reference to tier one advisor: Loan amount and interest repayment are also highly influenced by income taxation legislation. A broker requires taxation advice for further advising their clients over deductions, rebates, tax relaxation for the loan type that had asked for. A taxation consultant can share information about the tax benefits associated with the taxation (Briscoeand Rogan, 2015).
6.Analyses of possible loan structures: A client’s possible loan structure is formulated by analyzingthe client’s creditworthiness and his financial statements. After analyzing all the required/ necessitated documents (such as bank statements, tax returns, investments and its documents, financial package and such others), possible loan structures are modeledfor those particular individuals. A loan might also get rejected on the inability of the client to repay the loan installments or at the low creditworthiness of the individual.
7.Check for compliances with the acts: The loan processing mechanism is also adhering to varied relevant acts. Non-compliance with duchy acts leads to rejection of loan. The acts like National consumer credit protection act 2009, National credit act, Australia etc. must be complied with while processing loans (Griffith-Jones, and Rodriguez, 2016).
8.Assessment of achievement of client’s objective:Once, an individual loan file is accepted (on the basis of their creditworthiness and client objective), the person is granted loan and signs all the necessary documents with the banks (Briscoeand Rogan, 2015).
9.Sharing of information: The information with the clients are shared in both ways i.e. in written method and oral method.
Risk evaluation: In the loan processing mechanism, there is high-risk factor which is associated with the client (borrower). There are various risk factors such as credit risk, processing risk etc. Credit risk implies default in making repayments of the loan amount and interest. This is a highly prioritized risk. Thereby, a lender looks for mainly three things visualize security (assets), ability to repay the loan amount, and ascertainment of another risk which are already taken. Thus, mainly a lender checks the creditworthiness of an individual before assisting with any form of a loan (Boahene, et. al., 2012).
Risk assessment tools: Lenders will use various risk assessment tools in order to deal with the risks and complex client requirements such as serviceability tools, loan payment calculator tool which determines the figures (for loans) and thus, makes valuation for repayments. Broker will carefully make valuation of the loan amount otherwise wrong valuation might lead to wrong decision.
Communication: The broker will communicate to prevent all the possible risks attracted in the loan documentation process (Boahene, et. al., 2012).
Discussion on adverse issues: A borrower must be well informed of the credit risk which mightlead to rejection of the loan.
Establishment of probable risk factors: The factors such as security required in terms of loan amount required, repayment capacity, and risk assessment etc. must be calculated and communicated to the borrower. Proper communication aids in pre-understanding for applying or non-applying of the loan (Boahene, et. al., 2012).
Identification of stakeholders: the key stakeholders in a loan a process are broker, financial intermediary, clients and bank’s person. These people reviews are taken timely to identify measures and issues.
Follow up of all the industry and government requirements: Industry and government form anumber of legislations for loan processing systems so as to ensure that there is relevant disbursement of loans amount. Therefore, while formulating loan processing system, there must be constant review of the government latest updating about loan processing and must be applied and communicated to the client. A broker must be applied the code of conducts such as honesty, integrity, compliance with laws, maintenance of confidential information etc. Interpretation of the information: These must be communicated through written documentation with the clients and through good reputation in the market (Reinl, and Kelliher, 2015).
Impact of loan: As a broker, I will present all the possible loan options and structures to their clients. After considering all the required professional and personal documents of the client, a broker formulates different loan structure for its clients. The loan structure differs in terms of interest rate, installment amount, loan amount, loan period, tax relaxation or deductions, commission/ brokerage charges etc. A client has full right to access the different structures in their judgment and consult with their brokers with the most suitable loan option. The broker must also communicate with the pros and cons associated with each loan structure and provide honest and fair suggestions which have thehighest possibility of sanctioning (in terms of banking rules and policies) (Poser, 2015).
The pros of getting a loan include getting a big monetary amount which is otherwise not possible for an individual, an individual can instantly fulfill its objective as mentioned in the loan document, and there are easy installments which can be repaid at regular intervals. On contrary, the cons include rise of fixed obligation which has to be paid irrespective of cash flows, an interest amount also has to be paid which would not have risen (of loan has not be taken) thus, further increase financial obligations, usually loans are for long-term period thus, including high amount of credit risk, reputation risk, unpredictable etc. (Poser, 2015).
Fees and charges: The commission charges certain percentage such as 2%, 5% through draft, bank cheque etc. these must be discussed eagerly.
Explanation in terms of legislations and requisites: The client must further be guided by the legislation associated in case of default in repayment of interest/ installment amount, the damages which can get associated or even withpenalization.There must also proper advisory from financial planners and values. Financial planners communicate about the possible economic fluctuations and the possible situations about figuring loan amount, repayment installments, interest rates (fixed or floating) or interest amount. The information aid the client to assess the possible futuristic outcomes that might arise and allow them to choose among the different loan structure options (Poser, 2015).
Research and documentation: Lastly, it is holy important to inquire from the client regarding any issues with the loan options or non-understanding about the proposal. Any issues must be communicated and resolved either in written manner or orally. The client must also be well informed about the complaint resolution procedure. There is banking ombudsman who looks into financial matters.
Consultation with other professionals: From the point of taxation and other advantages, communication with the taxation analysts must be taken place.
Confirmation of client: there must be well communication meetings with the client which declares about the confirmation of the document or contract.
Compliance resolution procedure: Internally, the matter can be resolved by Australia information commissioner who considers complaints based on evidence and provides effective remedies to the customer. Proper information about complaint resolution must be exchanged with the client.
Research and documentation materials: While providing brokerage services, it is important to be well prepared for the various concerns that might arise while dealing with the clients. Clients have varied queries such as information of creditworthiness, loan documents, and mortgage requirements and its terms and conditions, computation of commission/ brokerage fees, current interest rates and computation of interest rates, taxation requirements and rebates etc. (Barth, et. al., 2013). Therefore, it is important to make research and prepare documents for the sake of customer knowledge and also to make compliances with relevant legislations as applicable.
Alternative recommendations: As a broker I will formulate documents which contains general alternative recommendations for different types of loans or for any general query, research materials about loan facilitation, different publications as published by financial institutions guidelines and regulation limits as set at different intervals (Barth, et. al., 2013).
Regulatory limits: These guidelines will provide necessary resolution for the client’s queries and also assist them with the current economic or external fluctuations going. This would assist in developing a true and trustworthy relationship and the client would be more generous in sharing with his personal or professional information (Barth, et. al., 2013).
A satisfied client is one who conforms to the legislative and banking requirements and admits to move ahead with the loan requirements. And, once a borrower accepts the proposal, it becomes a win-win situation for the broker.
Assignment 4: Servicing and Research Assessment
Part a – Ratio Analysis of Wholesale Butchers Pty Ltd
The ideal current ratio is 1:1 which means that the assets of the business must be equal to or more than the liabilities. Since the ratio is more than 1 the risk is not high. Also the ratio increased in the year 2015 which means that liquidity is improving.
Current Assets – Inventory – Prepaid expenses/Current liabilities
32582 – 5596/32128 = 0.84
35,197 – 5,876/ 32129 = 0.912
The acid test ratio has also increased in the year 2015 as compared to 2015. This means that liquidity is strong and there is no high risk.
Net profit/ Total equity
32,778/45,796 = 0.716
35,825/51,448 = 0.696
The return earned by the company on its equity investment is high but it decreased in the year 2015 from 2014 which means that risk on equity returns is increasing.
Net profit/ Total Assets
32,778/ 100,180 = 0.327
35825/94871 = 0.378
The returns generated by the company by utilising its assets are also high and it also increased in the current year which means that the risk is low.
22,256/45796 = 0.485
The debt to equity ratio of the company is not high which means that the debt risk of the company is low and the ratio also has a decreasing trend.
22,256/100.180 = 0.22
11,295/94,871 = .0.119
The debt to asset ratio is also low which means that the debts are not higher than the value of assets. There is low risk.
28,406/4,372 = 6.50
The interest cover has increased which means low risk.
Net operating income/Total debt service
32,778/4372 = 7.5
35,825/3735 = 9.59
Debt servicing ratio in 2015 is 9.59 as compared to 7.5 in 2014 indicating high risk.
Part – B Serviceability analysis of Wholesale Butchers Pty Ltd
30 June 2014
30 June 2015
Values in $000
Values in $000
Net Profit Before Tax
Depreciation / Amortisation
Directors Salaries / Superannuation
Other non?cash items
Extraordinary / Non-recurring expenses (may be
Earnings Before Interest, Taxation, Depreciation,
Taxation allowance **
Available for Debt Service
Interest Cover Ratio
Proposed Deductible Interest Costs:
Existing $_____ k @ ______% *
Plus Proposed $ 55 k @ 9 %*
Total Proposed Interest Costs
Proposed Interest Cover (Note 6)
Debt Service Cover Ratio
Existing O/D or Credit Card assumed fully drawn at
Existing Loan Repayments
Proposed Loan Repayments
Total Commitment Proposed
DSCR (Note 7)(Available for Debt Service divided by
Part- C Serviceability Analysis Comments
The serviceability analysis of the company has been conducted in accordance with the financial statements of the company for the year 2015 and 2014. It relates to the analyse of the company with regards to the potential of the company to pay off its debt repayments including principal and interest costs from its business income. The analyse will be done on the debt service ratio of the loan. From the observation of financial statements of the company and the ratios calculated it can be evaluated that the earnings of the company remanning after deducting all the expenses has increased from 2014 to 2015 which means that the company has good debt service potential. Also the company is regular in the repayment of loan capital which means the three is low risk with regards to repayment of loan. The liquidity ratio of the company is also good and has increased which means that the company possess enough funds to pay off the debts. The interest coverage ratio also increased indicating that the company profits are sufficient to meet out the interest cost. Thus, ether is no high risk in serviceability capacity of the company.
Obligation of Trustee
This is the trust which involves collective investment from many people and provides profits from the investment to investors in return.
The trustee is responsible only for looking after the property of the trust.
To earn returns from investments in properties, securities, mortgage loans, etc.
In this trust the beneficiaries are determined by the trustee and they do not have any fixed entitlement or interest in the trust
The trustee is responsible for the distribution of the income of the trust to the beneficiaries.
To protect the rights and interest of group of persons with regards to the assets owned mutually...
In this form of trust the beneficiaries are entitled to right and interest in the trust but the extent and amount are decided by the trustee.
The trustee is responsible for managing the property of the trust and distributing the income to the beneficiaries.
To establish joint ownership of people holding various assets an properties.
Discretionary Family trust
This type of trust s formed by the members of the family to hold the assets of family and the beneficiaries have no benefits from the trust.
The trustee is obliged to manage the property and assets of the family.
To safeguard and protect the assets of a family.
The person or body corporate that is responsible to manage the property and assets of the trust in accordance with the trust deed is known as the trustee.
Legal Requirements of Company – The legal requirements of a company incorporated in Australia is to get registered under the Registrar of Companies and other taxation and statutory authorities. The company is also required to comply with the legal framework applicable such as Corporation/Company Act.
Personal obligations of directors by law– The personal obligations of the directors of company include the responsibility and accountability of the acts done by the company or by the directors on behalf of company. They are required to possess professional skills and exercise due diligence while making decisions on the behalf of company. They are required to maintain the confidentiality in their professional conduct while in employment and shall take actions to protect the privacy of the company information.
Eligibility for the director of a company – To be eligible to become the director of company a person should of age 18 years or more and should be mentally capable. The person shall not be convicted of an offence which involves some moral turpitude and must not be declared insolvent by any court.
Minimum number of directors – In case of public companies of Australia there shall be minimum 3 directors and 2 of them must be independent directors whereas in case of private companies the minimum number of director is 1 which shall be independent director.
1.Balance Sheet – It is the statement which depicts the current financial position if the business in terms of its assets, liabilities and equity. It gives a clear picture of the status of business.
2.Profit and loss Statement – This is the statement which provide the details of all the incomes and expenses related to the business and help in determination of net profit or loss from conducting the business operations.
3.Depreciation– It is the amount or value in relation to the asset which represents the wear and tear of machinery or other fixed assets and the amount which relates to assets becoming obsolete.
4.Liquidity ratio – This is the ratio which helps in determining the cash position of the business and the ability of business to meet out the current liabilities and debts in an immediate manner.
5.Current Ratio – This is the ratio of current assets of the business to the current liabilities of the business.
6.Debt to Equity ratio – This is the ratio of the total debts of the company to the total equity of the company.
7.Cash flow Statement – This is the statement which provides the details of all the cash inflows and cash outflows in relation to the business. It is used to determine the cash movement for the business.
8.Asset – It is the property or equipment possessed by the business in order to perform business operations and generate revenues.
9.Liability – It is the debt or obligation incurred by the company.
10.Determination of net profit – Net profit is determined by deducting all the expenses from the sum of all the incomes of the business.
11.Equity – It is portion of capital of the business which represents the ownership.
12.Allowable expenses under Australian taxation – The allowable expenses under the Australian taxation are those expenses which are deductible from the allowable business income to calculate the taxable income.
1.Commercial Bank Bill – This is an instrument used by the company in order to raise finance from the investor through negotiating bank bills. The commercial bank bills can be issued for long term or short term (Minton, et.al, 2014).
2.Invoice and financing factor – This is method used for raising short term working capital for business by issuing invoices to other business in exchange of invoices of the factor,
3.Chattel Mortgage– It is the type of loan arrangement in which a movable property is used as the mortgage property.
4.Asset Finance Product – In this type of mortgage the ownership of the secured asset is transferred at the time of financing and the periodic repayments are made to the lender.
Outline of Principle
Creation and protection of value
Along with the application of effective risk management mechanism continuous monitoring and review is equally important.
Integral processes of organisation
Risk management policies and framework should be an integral part of the business strategy and operations.
Part of decision-making
The risk management process should for part of the decision making process and therefore the decisions shall be made on the basis of risk analysis and categorisation of risks.
Be systematic and structured
The categorisation and analysis of risk shall be performed in a systematic and structured manner and it should be conducted timely.
Address the uncertainties
The uncertainties and threats identified during the risk management process shall be dealt with effectively.
Use the best available information
The best available information shall be used for accurate risk analysis and prevention.
The business risks are the greatest threats of every business which can cause damage to the growth and sustainability potential of a business. In order to prevent the business from becoming insolvent or inoperative it is necessary to categorise the risks and take measures to prevent the likely impact of these risk son the business (Mason, 2014). Categorisation of risks is useful for a business due to the following reasons:
1.It helps in determining the current stage of the business out of the four stages of business life cycle viz. Introduction, growth, maturity and decline.
2.It help in determining the social and demographic trends of business
3.It helps in the analysis of the cost structure.
4.The impact of internal and external business environment can be ascertained in terms of various factors such as political, economic, social, technological, ecological and legal.
5.It helps the business in effective buyer and supplier negotiations.
6.It helps in determining the threats of new entrants into the market and the threats of substitute products by competitors.
Sustainability planning is the process of formulation of policies and strategies of a business organisation in accordance with the analysis of the impact of various environmental, social and economic factors on the business of the organisation (Galena, 2017). It helps the business organisati0on to co-ordinate the business strategies with the surroundings in achieving the business goals and objectives. The organisation is the manufacturing organisation engaged in the production of clothes and readymade garments. The company devised a sustainability policy to deal with the effect of political, social and environmental factors during performance of business operations to achieve growth and sustainability. The sustainability policy of the business is explained as follows:
Scope of sustainability policy
The sustainability policy of the business extends to all the legal, political, social, environmental and economic factors (Schaltegger & Wagner, 2017). Apart from this the sustainability policy extends to the diversified business market segments of the organisation. The policy will cover the legal aspects and other legislative and regulatory requirements.
Information for planning and developing the policy
For the planning and developing the policy the information will be collected by the organisation from various primary and secondary sources. The information will include market trends, competitor information, financial and accounting information of business, legislations and government policies, economic influence, global market factors, environmental influence, etc. The published information by government authorities, statistical bodies and other apex institutions will be used as the major source of information.
Consultation with stakeholders
The sustainability policy will be designed and developed by the lower level managers and supervisors in consultation with experts and employees. The policy will be approved by the top level management and shareholders of the company for final implementation. Therefore, the policy will be formed in consultation with the key stakeholders including customers, employees, shareholders, managers, experts and suppliers.
The sustainable strategies and policies are as follows:
Organisation’s commitment to policy
In order to ensure the commitment of the organisation to the policy the policy will be signed and approved by the managers and shareholders of the business. The policy will be published in the annual report of the company and the code of conduct for the implementation of the policy will be Made for the employees and other stakeholders of the company (Beckmann, et.al, 2014).
Methods of implementation, outcomes and performance indicators
For the effective implementation of the sustainability policy within the organisational functions and business operations the policy will be aligned with the business strategic plans and effective control mechanism will be developed through budget analysis for measuring the achievement of outcomes from the implementation of the policy. The benchmarks and key performance indicators (KPI’s) will be used by the business for measuring the outcomes and improvement in business performance and growth.
Promotion of workplace sustainability policy with expected outcome
In order to achieve the objective of promotion of workplace sustainability policy the employee code of conduct will be framed by the business and it will be implemented within the job roles and functions performed by the employees.
Thus, from the planning of sustainability development policy for the business of the company, it can be concluded that the effective implementation of sustainability policy will help the organisation to achieve the objectives of sustainable growth and development for long-term. It is recommended that the organisation shall implement the policy in accordance with proper planning and analysis as discussed.
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