Written Assignment
Complex Lending and Broking
(DIPMB2_AS_v3)
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Before you begin
Read everything in this document before you start your written assignment for the Complex Lending and Broking (DIPMB2_AS_v3) subject.
About this document
This document is the written assignment and includes the following:
• Instructions for completing and submitting this written assignment
• Section 1: Case Study A – Ray Murdoch and Steve Brown – Commercial Equipment Finance
– Task 1a – Identify the clients’ complex broking needs
– Task 2a – Develop complex broking options
– Task 3a – Implement complex loan structures
– Task 4a- Detailing analysis findings
• Section 2: Case Study B – Bill Smith and John Jones – Commercial Premises Finance
– Task 1b – Identify the clients’ complex broking needs
– Task 2b – Prepare complex broking options
– Task 3b – Implement complex loan structures
– Task 4b – Detailing analysis findings
• Section 3: Improving practice performance
– Task 5 – Develop, research and monitor plans to improve performance
How to use the study plan
We recommend that you use the study plan for this subject to help you manage your time to complete the written assignment within your enrolment period. Your study plan is in the KapLearn Complex Lending and Broking (DIPMB2v3) subject room.
Instructions for completing and submitting this written assignment
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your work regularly.
• Use the template provided, as other formats will not be accepted for this written assignment.
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(e.g. 12345678_DIPMB2_AS_v3_Submission1).
• Include your student ID on the first page of the written assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is clear and unambiguous.
The written assignment
The information and data you need to complete this written assignment is presented in the case studies at the beginning of each task.
This written assignment covers complex lending and broking and requires you to answer the questions for Section one (1) or Section two (2) and Section 3. Each case study focuses on a different lending scenario.

Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the suggested word count. Please do not include additional information which is outside the scope of the question.
Additional research
When completing this assignment, assumptions are permitted although they must not be in conflict with the information provided in the Case Studies.
You may also be required to source additional information from other organisations in the finance industry to find the right products or services to meet your client’s requirements, or to calculate any service fees that may be applicable.
Submitting the written assignment
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The written assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
If you reach the end of your initial enrolment period and have been deemed Not Yet Competent in one or more assessment items, then an additional 4 weeks will be granted, provided you attempted all assessment tasks during the initial enrolment period.
Your assessor will mark your written assignment and return it to you in the Complex Lending and Broking
(DIPMB2v3) subject room in KapLearn under the ‘Assessment’ tab.
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How your written assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
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• Assess your responses to each question, and sub-parts if applicable, and then determine whether you have demonstrated competence in each question.
• Determine if, on a holistic basis, your responses to the questions have demonstrated overall competence.
You must be deemed competent in all assessment items in order to be awarded your qualification, including demonstrating competency in:
• all of the exam questions
• the written assignment.
‘Not yet demonstrated’ and resubmissions
Should sections of your assignment be marked as ‘Not yet demonstrated’ you will be given an additional opportunity to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need amend those sections where the assessor has determined you are ‘Not yet demonstrated’.
Make changes to your original submission. Use a different text colour for your resubmission. Your assessor will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first assessor’s comments in your assignment, so your second assessor can see the instructions that were originally provided for you. Do not change any comments made by a Kaplan assessor.
Units of competency
This written assignment is your opportunity to demonstrate your competency against these units:
Unit code Unit name DIPMB2 Complex Lending and Broking DIPMB3 Business Management Skills
FNSFMB502
Identify and develop broking options for clients with complex needs
Started Completed
FNSFMB503
Present broking options to clients with complex needs
Started Completed
FNSFMB504
Implement complex loan structures
Started Completed
FNSCUS501
Develop and nurture relationships with clients, other professionals and third party referrers
Started Completed
FNSPRM602
Improve the practice
Started Completed
Note that the written assignment is required to meet the requirements of the units of competency.
We are here to help
If you have any questions about this written assignment you can post your query at the ‘Ask your Tutor’ forum in your subject room. You can expect an answer within 24 hours of your posting from one of our technical advisers or student support staff.
Section 1: Case study A — Ray Murdoch and Steve Brown – Commercial Equipment Finance
Note: You only need to complete Section 1 or Section 2 tasks 1-4 in this assignment, plus Section 3 task 5.
Background
You have just met with Ray Murdoch and Steve Brown, referred to you by another commercial client.
Ray Murdoch and Steve Brown jointly own a successful and growing business that manufactures metal pallets. They trade under the name Pallets-R-Us Pty Ltd. The pallets are manufactured using material that is lightweight and durable. There has also been a very structured approach to the research and development for the engineering and design of the pallets. The pallets are used in all industry sectors. Part of the process involves powder coating the finished product, which is currently outsourced to a local well-established contractor.
It is critical that Ray and Steve’s product meets market needs. They need to maintain sustainable production and operating costs if they are to forecast their sales and cost of sales.
They have a well-established client database that provides them with repeat ‘business-to-business’ dealings. While they have only been trading for 30 months, they have a solid business plan with written supply contracts with three major business clients and several smaller business clients.
Ray and Steve now require finance to assist them with the purchase of a sophisticated machine that uses the technical platform system CNC. This machine can be programmed to rapidly fabricate multiple components. The machine has an expected commercial lifespan of at least 15 years with operating software to be updated every three years. This software and upgrades is included in the purchase price of $800,000. They will have to import the machine from the US. Initial enquiries with the US supplier have indicated that they will require a letter of credit for the import of the machine. Once the machine has arrived and installed on the premises the letter of credit will be replaced with an asset lease. The asset lease requested by the borrowers will be for a seven-year term with a residual of 15%.
Their business employs five people and, with the expected increase in business through the automation of production, they have forecast that they will need to recruit an additional two staff members in the next 3–6 months to meet sales/production demands.
Ray has been in the metal fabrication field all his working life. He has an MBA and understands financial management. He also has solid engineering skills and developed the majority of the design works for the business. He is divorced and has no dependants. Steve is married and his wife is a school teacher and she will be retiring at the end of the year.
Steve worked with Ray at ‘Protech’ as a foreman. His skills are in production and managing project/job flow. He has high level technical skills and can complete works to specification at a high standard.
Steve and Ray have provided the last two years financial accounts for the trading business, as well as interim accounts for the current financial year. Ray’s brother provided business with a loan $500,000 when the business commenced and he is being repaid interest plus a principle repayment of $30,000 per annum.
Applicant information
Client Ray Murdoch Steve Brown
Current address: Unit 43, 25 High St Northville, Your State and has lived there for six years 23 Desmond Lane Northville, Your State and has lived there with Kate for seven years. They own property jointly.
Home phone: 9001 2121 9002 1212
Status Ray is divorced with no dependent age children Steve is married with no dependents
Employment Self-employed business owner Self-employed business owner
Income $100,000 per annum $100,000
Property value $750,000 $900,000
Cash at bank $12,500 $9,600
Contents $100,000 $85,000
Superannuation $250,000 Steve $350,000, Kate $60,000
Motor vehicle $40,000 $55,000
Home loan $250,000 repayments $2,068p.m., P & I, 18 years remaining $350,000 repayments $2,645 p.m., P & I, 22 years remaining
Credit card $25,000 limit with debt of $15,000, monthly payment calculated @3% of limit $10,000 limit with debt of $3,000, monthly payment calculated @3% of limit
Car loan $0 $15,000 repayment $746p.m., remaining term 4 years
The business
Year 1 net profit after tax $200,000
Year 2 net profit after tax $220,000
Current year interim profit (10 months trading) $200,000
Wages to partner 1 – years 1 and 2 $100,000
Wages to partner 2 – years 1 and 2 $100,000
Principal repayment to Ray’s brother repaid annually $30,000
ABN: 64-123-123-123
Business name: Pallets-R-Us Pty Ltd
Key balance sheet items
Cash $25,000
Trade Debtors $220,000
Trade Creditors $100,000
Notes The business currently meets all creditor payments at 30-day terms.
Debtor collection has been solid. They invoice an upfront payment of 50% of the sale price, which assists in funding their production.
They have orders of $1m over the next 3 months and have made an increase in their gross profit margin.
The orders are from several clients, so their debtors will be well spread.
Outstanding balance on loan from brother $440,000.
Task 1a — Identify the clients’ complex broking needs
Prepare a list of questions that you would need to ask Ray and Steve about their history, experience, business performance and the intended equipment purchase.
In preparing your list of questions you should ensure that you cover the following:
• the complex features in importing and purchasing this equipment and benefits that will come to the Company from such purchase
• the identification of potential risks in such a transaction and Ray’s and Steve’s tolerance of risk
• the financial aspects of the transaction and current financial position of the business.
(800 words)
Student response to Task 1a
——————————————————–
(Client’s Information and needs)
• What is the purpose of financial assists that you are required and have you used to financial facilities? If you have, what type of financial facilities?
• How much information do you have about financial products that you need?
• Would you explain about the main features and benefits of the machine in compare with current machine or system you are using now?
• What is a main function the desired machine and how it will contribute to growing your business? As example of current capacity and expecting capacity when you get the new machine
• As introduced, you want to import the machine. Have you research its availability in domestic supplier?
• If the machine has to be import from overseas supplier, did you receive any offer prices from plural suppliers? And also, payment condition and substantial conditions from overseas supplier.
• What is the best quoted price of the machine?
• What are the terms and condition of the price, such as price condition, installation, warranty and software upgrade or updating?
• Do you have general understanding of importing procedures and payment conditions, charges and tax matters, such as tariff duty and GST matter in imported goods?
• What is the forecasting number of turnover and profits after installing the new machine and are there any commitments from the clients to reach the outcomes in conservative and positive?
• How much funds can you distribute to purchasing of the machine from your own resources and what type of securities provide?
• What do you think the changes after purchase the new machine in the matter of operation system and others?
• What are the responsibilities of the client if the equipment is damaged or destroyed?
(Personal and financial information)
• Would you introduce about family status and financial position of all directors, such as own property, cash in bank, home loan, car loan, credit card and other assets or liabilities?
• How long having a relationship in the matter of business and personal between both of directors and other shareholders. Also, what is the role each of you for the business?
• Do you have any wealth plans like property or fund investments for the future?
•
(Business and financial information)
• Would you introduce about your company, such as establishment with motivation?
• Would you introduce general industry status that your business doing ?
• How is your business going in compare with when you the business and present?
• Please introduce your company’s structure in shareholding and directorship.
• Can you present your professional work experiences in related in the business, such as qualifications, professional skills, past employments?
• Since you start the business, are you maintaining a bookkeeping and lodged the company tax return by in-house staff or by professions, such as bookkeeper or accountant?
• How would you describe your business performance since you start the business in turn over, number of clients, number of employees?
• What is your business strength and weakness in the market? And how would you forecast the business in the future?
• Have you kept the financial statement in every financial year and tax return report?
• What types of assets and liabilities does your company own? And those are described in financial statement?
• Do you have financial statement for the last two financial years which are showing the profits, before or after tax?
• If the financial statement is not prepared, are you able to provide the numbers of income, experiences including wages, superannuation, list of assets and amount, list of liabilities and amounts and repayments against any loans?
• While you doing this business, how would you think about the potential risks in the industry issues, market issues, competitors transactions issues with clients especially bad debits ?
• Are you running the business under own business plan and able to provide for this loan arrangement?
• Have you think about what happens if you wants to change the facility or end it early?
• Can you introduce about your current clients? How many major and minor or casual clients.
• Do you have any scheduled orders from them? and what is the total amount from the orders?
• In addition, what is director’s personal income, superannuation, total value of contents, details of credit cards, home and car loans, such as limit, balance and monthly repayment.
• Would they prefer to use equity if it is available?
• Does your business have the ability to make the payments required under the loan?
• Can you put up collateral for the loans, such as your house and personal guarantee?
• Do they have any cash savings and do they have a preference for using cash resources?
• Lastly, please let me know registered ABN or ACN of Pallet-R-Us Pty Ltd and do you have any other trading name, if it is used differently?
Assessor feedback for Task 1a — Identify the clients’ complex broking needs
(Insert Feedback)
Question(s) that need to be resubmitted (if required) (List question numbers)
First submission Not yet demonstrated
Resubmission (if required) Not applicable
Task 2a — Develop complex broking options
You are required to prepare a full report addressed to Ray and Steve outlining available loan options; the process and the risks (potential and real) of which they should be made aware.
In a suitable report format you should cover the following:
1. the parties to the loan
2. Outline the type of letter of credit (LC) likely to be used, the parties to the LC and the high-level steps involved in setting up and establishing LC to enable import of the equipment
3. the product options that are available to finance an equipment purchase once it has arrived in Australia
4. your recommendation of best product option, including amount, security/collateral, term, potential interest rate and residual value (if any)
5. name three (3) lenders that would consider and potentially approve this transaction and advise Ray and Steve about product type, loan term, interest rate, balloon payment (if applicable) and monthly repayment they offer
6. the procedure to commence the import of the equipment and the loan, including documentation Ray and Steve need to provide
7. the client responsibilities, so Steve and Ray fully understand the facility being proposed
8. outline the risks (potential and real) of which Ray and Steve should be made aware
9. whether personal guarantee will be required from the Director’s spouse
10. a summary of all fees and charges — including those for setup and those of the lender
11. advise which relevant disclosures need to be made
12. a request for client to inform you of any questions about the transaction and/or provide an instruction to proceed.
(800 words)
Notes: Any assumptions you make should be listed, and not be in conflict with the case study information already provided.
You are to write a report to your clients, demonstrating your professional writing skill — not simply commenting on each of the points detailed above.
The use of tables in the report to set out some of the numeric information may be of benefit.
Student response to Task 2a
We are looking forward to working with you in designing your business financial loan application. The business financial loan application process is complex. It is an important step toward achieving business financial goals.
This letter is to confirm our mutual understanding of the terms and objectives of our engagement to provide you with business loan services as well as the nature and limitations of the services we will provide.
We will prepare your business loan application after consideration of your financial objectives and goals based on the provided information, past, present and forecasted financial situation. Our services will encompass the following activities
1. Applicant Information
• Directors: Ray Murddoch and Steve Brown are major shareholder of Pallet-R-Us Pty Ltd which is registered entity.
• The business is a manufacturer of metal pallets, established 30 months ago and have a plan in-house powder coating process the finish product to meet the sustainable production and running cost that has been done by outsource.
• Have contacted with an US supplier of new machine, CNC, having a technical platform system.
• The purchasing invoice amount is $800,000* including software with every 3 years upgrading.
Assumption: *The import price term is CIF(Cost, Insurance and Freight) Australian port that is delivery to Australian destination before customs clearance.
2. Outline of Letter of Credit
• Letter of Credit (LC) – LC is a type of payment in importing of the goods from overseas and this is transacted between importer‘s bank(or lender) and exporter’s bank for the safe and secured transaction until the goods deliver to the destination.
• To establish the LC through the bank to the supplier, applicant provide the fund to match the invoice amount or prearranged financial facility, then
• After shipping the goods, supplier present the required shipping documents (Bill of landing, Commercial Invoice, Packing List and other required documents) and for the reimbursement from the importer’s bank in accordance with the terms and conditions of LC
3. Available Type of Financial Product
We approach to the available financial products that would cover up the required process as following steps:
Stage 1: Importing Process: This is a short term financing to purchase the goods during importing process until arriving in Australia and the available type of loans are;
Stage 2: After arriving in Australia: as a medium-long term lease loan to own/use the equipment as fixed asset and/or hired equipment for the business.
In order to combine the above stages in one credit line, the possible type of financial products is classified as below;
• Equipment finance loan: This finance loan will combine the purchasing from overseas by LC term and will be replaced with asset lease product.
• Trade finance loan: This option is for general importing of the goods for the importer, but the separate financial product arrangement is required for your purpose.
•
• Line of Credit loan: is interest-only payment loan as mortgage of director’s personal property. Applicant can draw the fund at any time within the provided loan limits.
4. Recommend Production Options
We are pleased to present the most suitable financial product after consideration of your financial objectives and goals, and your present and forecasted financial situation.
Commercial Hire Purchase (Asset lease):
• The application of this product is subject to the pre-approval of LC establish for the import process and then, turn to CHP conditions.
• Purchased by financier (lender) and applicant use the equipment at paying a fixed monthly lease rental during the term
• Benefit of tax claim the lease payment and tax deduct depreciation during the terms
• Flexibility in payment schedules
• Own the equipment after completion of lease term at payment the balloon
5. Proposed loans structure:
• Calculation of imported equipment costs to finance:
Import Price (CIF Australia) $800,000
Import duty rate: free (HS Code: 8459, Origin country: USA)
Imported Value : $800,000
GST on Import value: $80,000
Other costs :$20,000
——————————————————————————————————
Total :$900,000*
(*Assumption: total custom clearance fee & charges, domestic freight, etc is $20,000)
• Lease amount: Estimated total land price is calculated $900,000 wand this would be financial value to need an amount and this is quoted from the lenders as below table;
• Required collateral and guarantee:
/Lender Stratton
Westpac NAB Bank
Products Asset lease
(Commercial Hire Purchase) Equipment Finance
(subject to LC estabulish)
Loan amount $900,000
Interest rate/Annum 9.5% 6.47+0.49%+
Monthly repayment $13,571.90
Lease term 7 years
Residual/Balloon
(rate) $135,000
(15%)
Security/Collateral To be provided
Fees and charges
Document&Settle 0.25% of loan amount
Establish fee $350- $475
Ongoing fee
Upfront fee
LC Estabulishment &
Assumptions: Base interest rate is 7.5% and lender’s margin rate 2% per annum(margin rate is offered by lender as per risk assessment)
6. Procedure and documents
1)To import the machine into Australia, applicant(buyer) should take the required procedure in international trading by the order of ; Supplier’s offer/quote – Buyer’s acceptant and Contract – establish the Letter of credit by buyer – supplier’s shipping – providing the shipping documents – transportation by ocean/air– arriving destination port- customs clearance in Australia and transport to buyer’s destination
In Importing procedure to establish the LC, supplier provide the Contract, Commercial Invoice, Packing List, Bill of Landing
2) In applying of loan application, we will gather your information to your requirement, obtaining a most suitable quotations and then we preparing and submission your application to the financial institution. While this procedure, applicant provide copy of business registration certificate, company tax return, financial information prepared by accountant, business plan/feasibility study, director’s tax return for the last 2 (two) years and agreement of collateral on personal properties.
7. Responsibility
In order to ensure that your financial loan contains sound and appropriate financial products recommendations, it is your responsibility to provide complete and accurate information regarding all aspects of your business and personal financial situation. Responsibility for financial loan decisions is yours. We will aid you in the decision-making process, suggest alternative recommendations to help you achieve your objectives, and assist you in determining how well each alternative meets your financial planning objectives.
The suggestions and recommendations included in your personal financial plan will be advisory in nature, and we cannot guarantee the performance of any investment or insurance products that may be purchased to implement recommendations in your loan. The loan will also include financial projections based on assumptions about future events. We cannot vouch for the achievability of such projections because the assumptions about future events may not prove to be accurate.
8. Risks
You have to aware the risks are potentially and presently may be in a position to fail to repayment sue to the various circumstance and situation changes. Those would be incurred:
• Industry risks: Pallet manufacturing trends are slow in last years and this trend are related connected industry
• Market risks: The current and future’s pallet market may be changed or turn to the different type of pallet and type of demand
• Debtor/Creditor risks; Debtor’s payment may be delayed and Creditor may change the payment conditions earlier than current term.
Personal guarantee
The financial institution requires directors’ personal guarantees in commercial lease as a guarantor when the business fails to pay repayment and guarantor should aware the range of guarantee and sign the agreement.
Responsible lending disclosure
I am a credit representative on behalf of Australian Financial Licensee (License No.xxxx) will provide client’s financial service. The licensee is granted authority to introduce and sell the finance products of lender’s financial products. The credit representative working under commission base from the lender. The credit licensee is a responsible entity in regards with the presented financial products.
This proposal of the finance facility is ~~`
We are available to assist you in implementing the actions and strategies agreed upon. The nature and extent of our implementation services will be established at that time. Implementation of your plan is a separate engagement, and we will provide you with a separate engagement letter for that process when and if that becomes appropriate.
Kind regards,
Assessor feedback for Task 2a — Develop complex broking options
(Insert Feedback)
Question(s) that need to be resubmitted (if required) (List question numbers)
First submission Not yet demonstrated
Resubmission (if required) Not applicable
Task 3a — Implement complex loan structures
Ray and Steve have accepted your recommendations and have given you authority to proceed with their application.
As part of implementing their loan application you are required to prepare a formal written loan submission to the lender for pre-approval. Note: Lenders have different credit policies and submission requirements do vary from lender to lender.
Your loan submission must include the following:
• details of borrower, guarantors and all contact details
• borrowers background
• an overview of the proposal — what the finance is for
• the proposed structure of the facility being recommended — product type, deposit amount (if required), loan amount, term, interest rate and residual value (if any)
• full details of the security/collateral that is to be provided
• serviceability calculations including Debt Service Cover Ratio (DSCR) calculations, including all personal borrowing facilities of the directors
• provide a ‘funds-to-complete’ table including statutory costs and any relevant fees
• highlight the relevant risks — industry, business, transactional — and how they are mitigated
• any other information that is relevant to assist the lender provide an approval
• your comments and recommendations
• list attachments
(800 words)
Notes: Any assumptions you make should be listed, and not be in conflict with the case study information already provided.
You are to write a formal submission to the lender; not simply commenting on each of the points detailed above.
The use of tables in the report, to set out some of the numeric information, may be of benefit.
Student response to Task 3a
———————————————————————
Dear Business banking relationship manager
Pallet-R-Us Pty Ltd is a very successful company that is well established in the pallet manufacturing industry. We began operation in June of 2013, as a small construction company that helped local business and homeowners with their renovation needs. We have a website that sells our services and also have many channels through which we gain new business.
1. Borrower/Applicant Details
The borrower of the loan is Mr. Ray Murdoch and Mr. Steve Brown jointly own and run a business entity under trading name Pallet-R-Us Pty Ltd (ABN. 123 123-123) address in Melbourne, VIC. They were worked together at ‘Protech’ and start the business together for 30 month and have successfully operating the business. Mr. Ray Murdoch has been in the metal fabrication filed in full working life and having a solid financial management with MBA and single person has no dependants. Steve Brown has a high level technical skill in production and managing projects and job flow. His wife is working as school teacher and she will be retired at end of the year and have no dependants.
2. Background of the applicant
Pallet-R-Us Pty Ltd is a manufacturer of metal pallet using lightweight and durable and the company well-established client data base with three major client and several smaller clients.
The product, pallets are used in all industry sector and they have been very structured approach to the for the engineering and design of the pallet. Mr. Murdoch is in the metal fabrication field in his full working life and possess a own property at 43/25 high St. Northville, VIC.at value of $750,000 (current home loan balance $250,000). Mr .Brown has a high level technical skill in production and managing project, job flow and own a property at 23 Desmond lane Northvill, Vic. at value of $900,000 (current home loan balance 350,000).
The property was valued at $1,450,000 couple of years ago and there is still pending mortgage to the tune of $625,000 on the property. The Bisset family is interest to buy a new property near their shopping centre which is around 3000 m2. The land is current treated as “Special Zone” however, the local council has stated that it will be opened as “Commercial” in the future.
3. Loan Purpose
The basic purpose of this loan is to purchase the technical platform system CNC, to cover the manufacturing process involve powder coating the finish of the product that are outsourced from local contractor so that meet the current and future’s market needs and maintain sustainable production with efficient operating cost.
They have a quote from US supplier that purchase price, $800,000 including installation, every 3 years software update for lifespan at least 15 years.
The estimated total purchase costs at $900,000 and the loan is estimated to include the purchase price, $80,000* towards the GST and other charges for importing, financing and other costs.
The required loan amount is summarized as below;
• Purchase amount: $800,000 (The price condition is CNF Melbourne sea port)
• Import duty on the goods: free
• GST on import value: $80,000*
• The charges and cost: $10,000
•
•
4. Fund Position
The funding position of the both directors are very strong, the following details will specify it;
The financial position of the company is that it poses net profits more than $200,000 in each year and also, this year will make more profits during last 10 months trading. The company have $100,000 trade creditors at 30 day terms and have $220,000 debtors at upfront payment of 50% of the sales and paying $200,000 as director’s wage and paying Mr. Murdoch’s brother’s loan by interest plus a principle of $30,000 per annum against $500,000 and balance on loan is $440,000.
Mr.Murdoch’s personal annual income $100,000 and his asset include the home which is worth $750,000,cash of $12,500, superannuation$250,000, contents value $100,000, motor vehicle $40,000. He pays monthly $2,068 against home loan $250,000 at 18 years remaining, and he has a debit $15,000 on credit card.
Mr.Brown’s personal annual income $100,000 and his asset include the home which is worth $900,000,cash of $9,600, combined superannuation with his spouse $410,000 and contents value $85,000, motor vehicle $55,000. He pays monthly $2,645 against home loan $350,000 at 22 years remaining, and he has a debit $3,000 on credit card, monthly pay for car loan $746 against $15,000 with remaining 4 years.
5. Facility Details and loan structure
The facility which is to be purchased is currently termed as Special purpose, however in the future it will generate the more profits as commercial.
• Loan amount: $900,000
• Type of loan : equipment finance for 7 years
• Repayment term: Interest only for 1st year and principal and interest for 7 years at fixed rate.
• Balloon : 15%,
•
6. Servicing Capacity
The servicing capacity of the client is accessed by the below table;
Year 1 Year 2 Current year
Add-Back items
Current Loan payment 1 (from Ray’s brother) $30,000 $30,000 $30,000
Director’s wages $200,000 $200,000 $200,000
Net profit a/tax $200,000 $220,000 $240,000*
EBITDA 430,000 450,000 470,000
Debit repayment commitments $169,342
(=139342+30000)
DSCR 2.54 2.66 2.78
*Base on interim profit for 10 months
((Assumption: 1. Current year business profit is estimated base on for 10 months to compare with previous years. 2. base Interest rate plus 2% at risk margin))
The applicant’s servicing ability is average 2.7 which would be normally meet the requirements.
7. Security
The both directors would provide personal guarantee as properties and those are accessed by
Accessing Security: that are still mortgaged with it current market value $750,000-$250,000=$500,000 and $900,000-$350,000=$550,000
LVR= (250,000+350,000)/(750,000+900,000) x %= 36.4%
And, will provide General Security Agreement and Guarantee of directors
8. Risk Assessment
The applicant’s business is specialized in metal pallet manufacturing with good reputation in industry, however we can estimate the potentials risks involved in the loan are classified as below potential area.
• Industry risks: Pallet manufacturing trends are slow in last years and this trend are related connected industry
• Market risks: The current and future’s pallet market may be changed or turn to the different type of pallet and type of demand
• Debtor/Creditor risks; Debtor’s payment may be delayed and Creditor may change the payment conditions earlier than current term.
With applicant’s professional skill would growing the business and increase the cash flow to repay the loan.
9. Recommendations
With analysis and consider the applicants present and future’s business activities, we can recommend the
• The management and operation capabilities are high level
• Servicing capacity is strong enough to cover the
• The provided securities are strongly committee
• The potential risks on the company’s
• The collateral securities are
10. Supporting documentation
• Loan application form,
• Financial statement and income tax proof for the last 2 years previous year,
• Business plan commitment schedule for the loans
• List of current creditors and debtors
• Purchase Contract from the US supplier
• A copy of current orders from clients
Please review the enclosed supporting documents and feel free to ask for any additionalany additional information or explanations you may want.
I look forward to a mutually profitable relationship with you.
Kind regards,
Assessor feedback for Task 3a — Implement complex loan structures:
(Insert Feedback)
Question(s) that need to be resubmitted (if required) (List question numbers)
First submission Not yet demonstrated
Resubmission (if required) Not applicable
Task 4a — Detailing analysis findings
This task will require you to assume the role of a credit assessor who is making a recommendation to their supervisor for approval of the loan application being assessed.
This will require you to provide a detailed analysis of your research into the applicant and their industry (based on case study background), your findings and risk analysis for the lender.
Verification of the applicant’s information and supporting documents includes testing and checking the integrity of information supplied.
1. Using the the information in the case study, check the legal entity of the business and identify which Australian Business Number (ABN) is correct:
(a) 64-123-241-193
(b) 64-123-123-123
(c) 64-123-123-163
Student response to Task 4a: Question 1
1. Result of legal entity identify by ABN Lookup research:
• 64-123-241-193 : is Invalid ABN
• 64-123-123-123 : is Invalid ABN
• 64-123-123-163 : is Invalid ABN
By ASIC research:
• The business name Pallets-R-Us is cancelled 0n 27/06/2017
• The business name Pallet’s R’Us Pty Ltd is deregistered on 03/07/2013, ABN 77 091 862 654
2. Identify two legislative requirements that should be reviewed to test and check compliance with identification processes for commercial borrowers.
Student response to Task 4a: Question 2
• To operate the business under the company structure, entity should register with ASIC(Australian Securities and Investments Commission) and follow the compliances.
• To do the business, not as company structure, the entity should register their business name and ABN for tax obligation with Australian Government Business Registration Service
3. What sources could you rely on to verify the financial data supplied by the client?
Note: As this is a case study only, you will need to explain where you would source the information, what processes you use and what documents would verify the financial data.
Student response to Task 4a: Question 3
• The company financial statement/information audited and signed by certified account of company
• A copy of Notice of Assessment of tax return for the company and directors
• Land data for the research titles and property certificates
• Personal Property Securities Register : To check and get the information of the director’s registered vehicles’ finance status.
• Copy of bank statements of director’s personal account
After reviewing the background information and business details of the applicant, complete the following questions.
4. Provide a summary of the impact that the new leasing costs will have on the applicant’s net profit, assuming an anticipated 50% increase in the net profit based on the Year 2 of trading results.
Student response to Task 4a: Question 4
9. Financial impact : The company will paying the monthly lease fee $ xxxx for the loan term as a recurring lease fee. It will accumulated $ xx per annum which will impact their monthly cash flow. To cover up the lease fee, they have to increase turnover more than xx% than current year. However, the paid lease fees will be added on the year expenses and be claimed and deducted from the payable tax
• Net profit (50% increase on average last two years):$
• Claimable new lease fee:$
• Estimated payable tax before new lease fee applied:$
• Estimated profit after tax:$
Therefore, the company will
5. Provide a costing of the lease as described in the background information. The interest rate for the lease will be 6%.
Student response to Task 4a: Question 5
Answer here
6. Detail the security instrument to be used for this transaction and what impact this may have on the business.
Student response to Task 4a: Question 6
Answer here
7. Outline any legal or other complex requirements identified.
Student response to Task 4a: Question 7
Answer here
(Task 4b questions 1-7, 500 words)
Notes: To complete this task you will need to refer to the Toolbox in the sections Pallets-R-Us Pty Ltd and ‘Lending organisation’s guidelines, policies and procedures, Legislative requirements, Loan verification and loan standards’ found in the Toolbox. You may also need to conduct your own independent research to answer these questions.
Assessor feedback for Task 4a — Detailing Analysis Findings:
(Insert Feedback)
Question(s) that need to be resubmitted (if required) (List question numbers)
First submission Not yet demonstrated
Resubmission (if required) Not applicable
Section 3: Improving practice performance
Note: You only need to complete Section 1 or Section 2 tasks 1-4 in this assignment, plus Section 3 task 5.
Task 5 – Develop, research and monitor plans to improve performance
As the owner of your mortgage brokerage practice, you have decided to undertake a review of the business and its processes with the objective: to improve its overall performance for the practice.
1. To achieve this, you will initially need to conduct some research on the internet. Reference sites are located in the Toolbox in the section: Improving practice performance. Once research is completed, you are required to develop and document your plans to introduce the new improvement into the practice. To do this, fill in the table below:
Student response to Task 5: Question 1
Goals Current position Improvement
-Increase the lender’s approval.
-Approval percentage against number of applications
-Personal target set
-Quarterly achievement Result
-Time -Gradual decreasing of approval
-Unsatisfactory quality of work
-Low quality of services
-Incorporate workplace behaviour -Track progress
Performance Current position Improvement
-Identifying the objprogress ectives per
-Performance planning per objective
– Obstacles identify and overcome
– Monitoring & feedback
-Re-evaluate & adjustment – No test on the knowledge of the lender’s products
-No analysis of client’s
-No value of time spent on company support – Assessment
– Mutual or group communication on the feedback
–
Using data Current position Improvement
Each case are independently managed on each employee -Client satisfaction scale rate is
-Deadline/due date met
Document Current position Improvement
-Monthly Sales Progress Updating
-Identify the folder
-Open for Internal reference
-Assessment sheet
2. While conducting this research you found that your credit representatives are failing to input all the essential data and document requirements into the aggregator software platform following a software upgrade. To avoid any potential breaches in compliance, provide an effective method you may use to negotiate an acceptable timeframe with the credit representatives to implement these new software processes.
Student response to Task 5: Question 2
Firstly, contact and inform the aggregator that the missing items from latest software platform and request to inform the changes and/or site map to self-troubleshot. To prevent the delay of data input due to the technical problem of platform, discuss and request an alternative method that aggregator would accept and acknowledge the essential data going to be input by electronical mail and/or post
2. To monitor the progress of these changes you negotiated in question 2 above — with the credit representatives, complete the monitoring improvements table below:
Student response to Task 5: Question 3
Monitoring Improvements
Before software upgrade After software upgrade Record of changes made
Credit representatives using the platform without failing input the essential data in accordance with implements.
Aggregator’s platform has been changed by software upgrade.
The essential data can not input correctly due to the change of platform layout and function menu Make a list to match the menu between before and after software up grade.
Record the newly added menu and deleted old menu.
Internal Notice to all credit representatives.
(Task 5, Question 1 and 2, 350 words)
Assessor feedback for Task 5 — Develop, research and monitor plans to improve performance:
(Insert Feedback)
Question(s) that need to be resubmitted (if required) (List question numbers)
First submission Not yet demonstrated
Resubmission (if required) Not applicable