National Finance Institute

National Finance Institute | National Institute Of Public Finance

BACKGROUND QUESTIONS: National Finance Institute

How long has the business been trading?

Tell me about the business / industry

  • Who works for / in the business
  • What are their roles
  • Are they contracted / self-employed / permanent etc?
  • How involved are you in the day to day operations?

Client Base

  • What’s the spread of business?National Finance Institute | National Institute Of Public Finance
  • Who is the current banker?

Business Plan

  • Can you show me and talk me through your short and long term goals.?

Business Loan

  • Details of the private investor loan – do they have equity
  • LOAN PURPOSE

How will you use the funds?

Tell me about the trucks – new / used?

Why do you need them now > Do they have a contract for the use?

Make and model of the truck?

Any accessories or modifications?

Where will the truck be stored when not used?

When do you need the trucks / what is the timeframe?

FACILITY DETAILS

Have you spoken with your Accountant about what sort of loan structure you require?

What loan term do you require?

What residual is needed?

Are you looking to borrow 100% of the PP. How will you cover the costs?

Trade Ins?

SERVICING CAPACITY

Income expected from the loan that enables them to generate more income?

What changes to your income &expenses

Full tax returns full financial for all entities

BAS & Interims

Commitment schedule

Aged Creditor / debtor schedule

Tax portal

Cash flow

SECURITY

Have you been asked for financial guarantees previously? If so did you get Legal Advice

RISK ASSESSMENT

Have you sourced insurance for the trucks? Can I see the insurance schedule?

Do you expect and changes to your business / industry that may affect your ability to repay the loan

Are there any KEY PEOPLE in the business?

Have you thought about succession planning?

Do you have any large outlays of cash?

Have you considered personal insurance / life insurance / income protection

Check out the business’ safety record?

IS THERE ANYTHING ELSE THAT I SHOULD KNOW???

Dr R& S

Thanks for allowing me to present a solution for your finance needs Id just kike to confirm the understanding of your requirements

Parties to the loan

Holding company Henman Holdings P/L ATF The Henman Discretionary Trust will be the borrower & will purchase the equipment which will be internally hired to Henman Transport P/L

Both of you are directors of both companies

Security

The main security is going to be the trucks. Therefore, a charge will be over the purchased vehicles

Guarantees

Trading Company needs to provide a guarantee

Director’s Guarantee from Ray and Steve

An alternative could be a GSA (Guaranteed Security Agreement)

Facility Details

MASTER FINANCE FACILITY TO BE RECOMMENDED as it has a facility with a limit of $500,000

Chattel Mortgage (with first facility $145,000

  • 48 months
  • nil balloon
  • extra repayment to be applied from GST refund

PROPOSAL DOCUMENT to client

From my initial research your app is likely to fit with a few lenders however based on my experience with ANZ Bank I will submit the app to them

National Finance Institute | National Institute Of Public Finance

Client Responsibilities

I understand that you have sought advice from your accountant about this facility. I rec that you seek legal advice re the guarantees and also rec that you have your insurances reviewed to ensure that they are up to date and appropriate so that you interests are protected as well as can in relation to death, illness and sickness

Required Documentation

Privacy

Income statements

BAS

ID

Trust Deed

Tax returns financials for all related entities

CV and org chart

Written contracts

Invoice of the truck that is being purchased

Qualifications

Quotation

Business Plan

Tax Portal statements

Insurance Schedule

Verification of assets

  • Business Trading Account statements – to show how people manage their finances

Verification of Liabilites

  • VEDA Report
  • Credit Card statements relating to the business
  • Private Investor agreement

Once I have all the supporting documents back from you I will expect to lodge within 24 hours.

I would expect a response from the lender within 4 business days.

Any response will be subject to receipt of the tax invoice

Insurance needs to be in place.

Lender needs to be mentioned as being an interested party to the loan

Sign and return the documents

Lender pays supplier direct

Collect your truck

Approx Fees and Charges

Lender establishment fee $1,000

Broker commitment fee $500

Lender document fee$350

Establish each contracts

Broker Comm of 2% to be inc.in the pricing of each chattel mortgage based on vehicle PP

Cost to register charge over vehicle approx $250.

I look forward to helpingyou with your finance needs and will keep you informed throughout the loan process. Please sign the attached authority to proceed and send back to me.

LENDER SUBMISSION

Borrower’s Details

Borrowing entity Henman

Industry – Transport

Trading address make up

Directors make up

Accountant make up

Statement of Position attached 

Scenario and Initial Background

Experience and Industry background

Trading for 34 months

Established with unsecured seed capital

Internal borrowing arrangement

Loan Purpose

Initial need to borrow $145,000 to use to meet their new contract agreement

They expect to make additional purchases of trucks on the near future.

Seek limit of $500,000 as anticipate making capital purchased to $500k in the next 1 2 months.

Facility Details

MASTER FINANCE FACILITY TO BE RECOMMENDED as it has a facility with a limit of $500,000

Chattel Mortgage (with first facility $145,000

  • 48 months
  • nil balloon
  • extra repayment to be applied from GST refund

Funds Position

100% fund will be required with costs being covered by the client

Servicing Capacity 

INCOME

201420152016 YTD 10 months2016 (annualized)
Sales700,000812,0001,125,0001,350,000
Net Profit240,000358,000506,000607,000
Profit%34,00044,00045,00045,000

 

Annualised net profit 2016$607,200
LESS Tax @30%$182,160
ADDBACKS:
Depreciation$86,000
Interest$52,000
Super$60,000
TOTAL$623,040

OUTGOINGS

Seed Capital / start up finance$100,000
Provision for Director dividends$200,000
Existing Equipment Finance$60,000
New (second) depot$72,000
Proposed Facility$151,000
TOTAL$583,000

 Income 623040

Outgoings 583,000

Surplus $40,040

DSCR (income / outgoings) 1.07

Are they paying themselves enough money to live?

Ray (married with no children)

IN

$100,000 franked dividend (no more tax to pay) to cover

  • living
  • homeloan $20,365
  • Credit card limit $20,000

Steve (single no kids)

$100,000 franked dividend (no more tax to pay) to cover

living

homeloan $28510

credit card limit $10,000

car $3740

Security

The main security is going to be the trucks. Therefore, a charge will be over the purchased vehicles

Guarantees

Trading Company needs to provide a guarantee

Director’s Guarantee from Ray and Steve

An alternative could be a GSA (Guaranteed Security Agreement)

Risk Analysis

  • Cashflow

DSCR of 1.07 is adequate in view of the growth of the business

The loan assessment is based upon the whole of the loan being fully drawn however it is not being assessed with expected income from new contracts

See Finance has only 2 yrs to run and will free up $145,000 in cashflow

  • Security Equipment Details

Here just make up the type of truck

  • New
  • Strong Brand
  • Warranty
  • Strong secondary market
  • Insurance

Insurance has been referred to an insurance broker as per the attached.

Rec

Proposal is recommended in view of the client being able to display established servicing which will improve in the future. Their character in the industry is very strong. They have industry specific qualifications, have been in this line of work for many years and can display track record, and have strong credit history. The equipment is of good grade and there is a sound establishment and repute of directors. The client has a very diverse client base.

Attachments

Privacy

Income statements

BAS

ID

Trust Deed

Tax returns financials for all related entities

CV and org chart

Written contracts

Invoice of the truck that is being purchased

Qualifications

Quotation

Business Plan

Tax Portal statements

Insurance Schedule

Verification of assets

  • Business Trading Account statements – to show how people manage their finances

Verification of Liabilites

  • VEDA Report
  • Credit Card statements relating to the business
  • Private Investor agreement

ASSIGNMENT 3

Question 1.

Introduce myself

The process

What I can do for you

Using eye contact

Open questions to gather information

Closed questions to clarify

Language to help with cultural differences

Interpersonal skills – eye contact, grooming, asking about them and what they are interested in.

Professionalism

Presentable.

Organisational Skills

Explaining why

The process and next steps

Documentation and note taking

Keeping on contact with the client throughout the process

Question 2.

ons with clients that complete the file by uploading

Templates and spreadsheets accessed via Aggregator software. If I use these guodelines I am meeting their operational procudures. (1/2 page)

Question 3.

Explore their objectives

Analyse this information

Present a solution to meet their needs

If you encounter a challenge ie apartment size. Make sure that you sort out the BIG challenge first

Research is to send an email to the lenders to work out an expression of interest.

If I identify and tax or legal or insurance issues, then I will refer my client to an experienced professional that I trust.

In all circumstances I insist that my clients seek Financial Advice to ensure that they explore their options.

Work with other stakeholders to share info to share the best result for the client, but being mindful of Privacy Act obligations

Question 4.

Risk Evaluation Criteria

  • 3 things to consider

Capacity

Character

Collateral

Capacity

Income versus expenses

General ratios in their lifestyle

Trends

Character

  • Qualifications
  • Knowledge & experience
  • Integrity
  • Consistent information around reputation
  • Instinct
  • Employment history CV
  • Loan repayment history
  • Credit Rating
  • Check social media
  • Statement of Position (assets and liabilities)

Collateral

Valuation

  • is the property specialized?
  • Is there a risk rating?

Risk Assessment Tools

Bank valuation of property

Establishment of stakeholders and how throughout the loan process:

  • you seek their views?

Every deal has risks;however, the lender needs to ensure that they are controlled.

Lender:

  • Consult BDM
  • Check policy
  • Call credit team
  • Identify the risk – then provide mitigants

Client:

Ask the client

Industry best practice

MFAA Code of Practice 30 CPD

NFI webinars

Attend PD days’

Mentoring

Lender training

Industry publications

How would you read and interpret organizational and industry information?

Carefully and thoroughly.

Question 5.

  • Discussion of Impact

This is outlined in the disclosure documents that I give to my client being:

  1. Credit Guide
    1. – external dispute resolution (EDR) and internal dispute resolution (IDR)
    2. Licence details
    3. Lenders used
  2. Credit Quote
    1. Fees payable to broker and clawback
  3. Credit Proposal
    1. Recommendation & reason
    2. Commission
  4. Preliminary Credit Assessment
    1. Affordability

Consultation with I always recommend professional legal and financial advice.

Question 6. 

Consider

  • Research/documentation materials
  • Alternative recommendations
  • Regulatory limits and financier guidelines

Anticipate the clients concerns beforehand:

  • Will I get approved
  • Fees
  • Timeframes

Assignment 1

Loan Submission

Borrower details

  1. Andrew Mark Bisset and Jane Elizabeth Bissett ATF Bisset Family Trust (add dates of birth and soft details ay foot of P13 tab 3
  2. Statement of Position is attached

Background

  1. Work / career history
  2. Qualifications
  3. Mentioned the shopping centre
  4. Bissett’s Real Estate Pty Ltd was formed at the beginning of the last financial year to take over the real estate business, which was previously conducted by a partnership between MrBissett and Joseph Hooper. Bissett Real Estate Pty Ltd took over the business when Mr Hooper retired.

Loan Purpose

  1. Borrowing 100% + costs
  2. Buy land
  3. Refinance
  4. Costs
  5. Why are they not using their existing lender (Banker)

Facility Details

Make sure that I diversify the clients’ lending

  1. Refinance – commercial loan – 7% interest rate @15 years P&I

$625,000 on$1,450,000 shopping centre

  1. Purchase – commercial land loan –

$625,000 on $600,000

Funds Position

  1. Client seeks 100% of purchase price to $25,000 to cover costs

Servicing Capacity

Assume company tax

Net profit                    $50,000

Less tax @ 30%           $15,000

TOTAL                         $35,000

Add backs

Interest                        $52,000

Depreciation               $25,000

TOTAL                         $112,000

Company

Net Profit                    $72,000

LESS Tax @30%           $21,600

Add backs                    $50,400

Outgoings

$40,000           @11% IO                                 $4,400

$625,000         @9% P&I 15 years                  $76,070

$625,000         @9% IO                                   $56,250

TOTAL                                                             $136,720

IN

OUT

SURPLUS

DSCR income / outgoings

/ 136,720

Security

  • Zoning

Risk Assessment and Management

Financials – the rev has dropped – understandable as Joseph Hooper has left (he was a very good-sales person).

Insurance – seek advice for this however review the attached schedules of insurance

Recommendations

I would certainly recommend this deal.

Due to

Extensive experience for MrBissett specializing in commercial property

Shopping centre is a great asset backing with LVR at 61% and expected further improvement with rezoning.

Healthy capacity to repay the loan

The share portfolio offers a good liquid asset that can be liquidized if and when need

Directors have a very good position

Attachments

Privacy

Income statements

BAS

CoS

Rental agreements and bank statements to support the rentals

ID

Loan statement for 6 months

Trust Deed

Tax returns financials for all related entities

CV and org chart

Written contracts

Share Portfolio – statement

Invoice of the truck that is being purchased

Qualifications

Quotation

Statement of Position

Business Plan

Tax Portal statements

Insurance Schedule

Verification of assets

  • Business Trading Account statements – to show how people manage their finances

Verification of Liabilites

  • VEDA Report
  • Credit Card statements relating to the business
  • Private Investor agreement

David Marks

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