Example of a Paper on Credit and Lending

This paper presents answers to the questions one to five. The paper critically evaluates the Green bus proposal. It goes further to appraise the facilities that are available for the ABC Food (Nigeria) in support of any foreign business transaction. The paper appraises the role of administrator, discusses the position of a franchise, it also evaluates the key elements of market/industry risk assessment and finally addresses the fifth question.

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Borrowing history

The business is a local Green bus company has been in business for 20 years which two directors are in the mid-40s. They have had an overdraft facility sanctioned to 300,000 last year, further increased to460,000 for eight months then reduced to300,000. The bank was not willing to add more. Even us we should proceed cautiously due to their feeling of overtrading. The amount got adjusted to 350,000 for 6-month period review and conditional on increased directors to 120,000. The balances in the balance sheet are standing at 284,000 for example within limits.

Collateral

The back in case this does not turn out to be okay. What was provided is a personal guarantee of directors to the tune of 120,000. This figure was initially 60,000 joint and several. The fact of increasing raises words of caution. Also, the bank can obtain as it were, a standard security over business premise and bond and floating charge from the company. The firms value stands at 160,000 and it looks they have not been evaluated for three years thus obtain current valuation report from a competent institution. Floating charge looks good debtors stand at 680,000 and stock 24,000.

We need to see premise lease to determine remaining terms of the same document. A search to be done on premises to ensure that priority claim against collateral is secure. Insurance ought to secure interests. The loan value ratio: 284:160 (1.8:1) which fall below industry requirement of 2:1. The premise as collateral is an excellent type of security and acceptable. The company should offer security to 75% appraisal value and Inventory of up to 60 percent.

Cash flows

This business is a bus company who cycle means that they are good when new and later in the life plagued with breakdown repairs and high maintenance expenses. Caution will be to have a look at age the of buses. The profit seems to be improving year by year from 144,000 to 204,000 and 244,000. Tax liability needs to be paid which will consume cash, loan repayments, and creditors. I can further see business as undercapitalised 60,000 low. Need to inform the directors to increase capital. The lease is also high at 570,000. Sales have not been on a rising at a good rate while directors remuneration seems high.

Character

The negatives are few, but the business is new to us. We are just relying on historical records of former bankers, but to us, it is new business. It has been around for over 20 years that is a plus. Off the gulf is finding any elements of middle life crisis issues of the director.

Amount

The request is for 460,000. The substantial amount of an undercapitalized business is more than 50% increase from previous levels. Need to proceed with care.

Recommendation

Allow the facility with a caution that RM closely monitors account or bring it under his/her portfolio or assign sometimes to manage.

Revolving lines of credit

Domestic facilities available from local commercial banks which are utilized to fund exports sales for the time being up to payment receipt of proceeds. A customer can choose a commercial bank that has an experience international division so that amongst other things the customer can get overseas banking facilities.

Bill discounting and bankers acceptances

The customer can get exporter to hold its irrevocable letter of credit because they are less risk once confirmed by a reputable local bank. A banker holding bills may discount and get cash immediately; exporters may not get a value equivalent to face due to interest and fees charged by the banks. A local bank can take a step to accept drafts issued at a fee to the client, but only for customers with clear records.

Factoring services

To factor is a process of obtaining cash on a foreign debtor account so that a client surrender title to factor. No recourse exists on exporter with respect on the factoring service.

Forfeiting

Forfeiting is the discounting done on long term debtor accounts or promissory notes. The client may also obtain a government guarantee that will add value to its name. A challenge will be that forfeiting and factoring is done with recourse to the customer, which means customers should confirm the arrangement.

Confirmation services

Refers to a service whereby an independent institution confirms export transaction in sellers market and payment is received in foreign currency. The organisations confirm items such as goods, modes of transport fees of forwarding and agents commissions and duties payable.

Programmes from government

Several programs such as guarantee, letters of approval, loans and grants to worthy exporters. They may be aimed at a campaign to improve exporters thus may result in subsidies and low market rates. It may also include insurance programs to bring down risks.

Question Three

Role of an Administrator

According to QCAT (2015), an administrator is a person appointed by an organization to make decisions and act on behalf of the organization. Overall the roles of an administrator depend on organization but the following stand out as discussed below.

Organisation and planning

The administration is in charge all ranges of the plan both short and long term necessary for coming up with specific objectives. These should be SMART; it is important for an administrator to understand organization plans for efficiency.

Directing

The Administrator leads other employees to accomplish agreed goals by bringing together resources and efforts. Interpersonal techniques should be abundant with the administrator to address the different personalities. Other personalities have unique capabilities by delegation to supervisory employees and retain responsibility as well as control.

Staff

The organization needs the right people through assessing knowledge and needs. An administrator work is coordination of all employees, recruiting and selection as well as the appraisal.

Liaison

The staff and management need to liaise by the administrator because he engages them in search for solutions. In the process, the firms working environment becomes conducive for production. The employee also deals with information, production, and targets of all online and effects corrections.

(b)Position of franchise

Financial

Help the business to financial success. Many of the items are costs to set up, purchases price, prices of marketing as well as lease rent. Evidence will be required to support every financial expense.

Resources and time

Franchisee has invested in the business and thus it ought to oversee franchise at the beginning and must dedicate quality time and resources to ensure his investment succeed.

Partnering with reputable brands

A good image should be seen in every way the purchase. A franchise acquires, apply and improve standards inherited in business purchased. This way a franchise will realize and take advantage of opportunities that present them.

Communication

Communication is the chance to discover requirements, concerns and challenges faced by the franchise. The franchise must ensure that expenses and any profits made, put into place policies, regulations, and rules. Such is important so that any rules that may not be practical should not be communicated to the seller.

Ethics and standards

Every franchise should keep up standards and ethics to minimum levels expected, failure will result in disfranchisement. Examples include logo maintenance, official color schemes, product package of which from time to time inspection is done by providers to confirm compliance (Boehm, B. and R. Turner, 2003).

Question four

So that one manages risks efficiently he needs to understand the elements that make the risk. Identification of the type of risks the industry is facing. A firm can face a number of risks that require identification such as property being stolen or being damaged or getting lost; death or illness to human personnel; offices breach of their duty or breaking the laws of the land and bad reputation and professional misconduct. Larman (2004) was of the opinion that, for risk management to be successful there should be proactive actions and monitoring by individuals. Bruegge and Dutoit (2000) also identified that many projects could fail when wrong decisions regarding a risk get addressed.

Prior site inspection

Inspect the area which is to be the place of work to see in advance potential risk areas. Discover early the risk hazards that can affect people, children and persons with physical impairment. Take precautionary steps to weed out such potential hazards.

Make revision of work practices of the firm

No institution or people are risk-free. All including customers, employees and management are potentially a risk to organizations operations. Staff may hurt clients in the process of serving them, the job itself may be stressful. Work needs to be revised against those of other to discover areas of risk and minimize them as soon as possible.

What are legal consequences of the risks?

Organisation may go to court on things to do with workplace health and wrongs to clients. In some cases the organizations may not comply with the law or its people break the law.

Carry out sensitivity analysis

Sensitivity analysis helps to answer unexpected situations that may occur in normal operations for example fire breakout, accidents, flooding or an act of God. Alternative courses of action should be in place.

Constant communication with employees

Constant communication with staff implies that all action to be implemented is done by employees and therefore should be informed of what to do when faced with risk. Staffs get informed in many ways such as interviews and meetings. Encouragement brainstorming is also important as it calls for both management and staff to come together and reason out for new ideas on dealing with risks.

Question five

Appropriation is to apply for payment. Take for example creditor and debtor looking into the law to provide rules with respect to payments. If debtor gives money to a creditor, it is expected according to the law that it means to clear a specific debt. According to the law, where a debtor has some debt accounts and willingly pays in some amount, the money will apply to the debts according to his wish. Receiving unit has right not to collect money when they do not agree with the wish of the debtor.

Appropriation gives the debtor first option to apply payment where he has several and specific debt accounts to his name. It is, therefore, not applicable to single debt and installment payments.

According to English law, there are certain rules to be observed by the recipient of debtors money. Where debtor indicates a debt to be cleared and in the case of several debts to an individual and makes a pay to which he expressly shows how to apply it should be honoured (Citeman, 2008).

In conclusion, this paper has critically analyzed areas in credit and lending. For instance, through the evaluation of the Local bus proposal, it can be concluded that business entities ought to make critical steps in ensuring that their investments achieve the desired goals. Moreover, market risk assessment is of great importance to any business entity.

References

Boehm, B., Turner R., 2003. Balancing Agility and Discipline: A Guide for the Perplexed.

Boston, MA, Addison-Wesley.

Bruegge, B., Dutoit A., 2000. Object-Oriented Software Engineering: Conquering Complex

and Chang...