DIPMB2 Complex Lending and Broking Assignment: Case Study Report

This document presents a comprehensive solution to a complex lending and broking assignment for the DIPMB2 course, focusing on a case study involving Pallets-R-Us Pty Ltd and their need for commercial equipment finance to purchase a CNC machine. The assignment requires the identification of the clients' complex broking needs, the development of complex broking options, and the implementation of complex loan structures. The case study provides detailed financial information, including applicant details, business financials, and key balance sheet items, to facilitate a thorough analysis of the clients' situation. The solution demonstrates an understanding of the clients' requirements and the ability to create appropriate financial strategies and loan structures to meet their needs. The assignment covers the units of competency DIPMB2, DIPMB3, FNSFMB502, FNSFMB503, FNSFMB504, FNSCUS501 and FNSPRM602.

Written Assignment
Complex Lending and Broking
(DIPMB2_AS_v2)
Student identification (student to complete)
Please complete the fields shaded grey.
Student number 10551834
Written Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Parts that must be resubmitted:
Result — resubmission (if applicable)
Result summary (assessor to complete)
First submission Resubmission (if required)
Task 1 Demonstrated Demonstrated
Task 2 Demonstrated Demonstrated
Task 3 Demonstrated Demonstrated
Feedback (assessor to complete)
[insert assessor feedback]
DIPMB2_AS_v2

Before you begin
Read everything in this document before you start your written assignment for the Complex Lending and
Broking
(DIPMB2_AS_v2) 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
• 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
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
(DIPMB2_AS_v2) subject room.
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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.
• Name your file as follows: Studentnumber_SubjectCode_Assignment_versionnumber_Submissionnumber
(e.g. 12345678_DIPMB2_AS_v2_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
one (1) of the two (2) available case studies. 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.
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Submitting the written assignment
Only Microsoft Office compatible written assignments submitted in the template file will be accepted for
marking by Kaplan Professional Education. You need to save and submit this entire document.
Do not remove any sections of the document.
Do not save your completed written assignment as a PDF.
The written assignment must be completed before submitting it to Kaplan Professional Education.
Incomplete written assignments will be returned to you unmarked.
The maximum file size is 20MB for the written assignment. Once you submit your written assignment for
marking you will be unable to make any further changes to it.
You are able to submit your written assignment earlier than the deadline if you are confident you have
completed all parts and have prepared a quality submission.
Please refer to the Assignment submission/resubmission instructions (pdf) in the Assessment section of
KapLearn for details on how to submit your written assignment.
Your written assignment must be submitted on or before your due date. Please check KapLearn for the
due date.
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
(DIPMB2_AS_v2) subject room in KapLearn under the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in
your written assignment. Failure to do so will mean that your assignment will not be accepted for marking;
therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your submission
deadline to submit your completed written assignment.
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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.
Your assessor will follow the below process when marking your written assignment:
• 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 competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ 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 competent’.
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.
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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.
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Section 1: Case study A — Ray Murdoch and Steve Brown –
Commercial Equipment Finance
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, using 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
need 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.
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 married and has no dependants. 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.
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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: [phone] 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 payment @3% $10,000 limit with debt of $3,000 payment @3%
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
Key balance sheet items
Cash $25,000
Debtors $220,000
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.
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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
Response
The purpose of the report is to understand the risk faced by both Ray and Steve, where it requires different
level of available loan options to support its purchase. The relevant guidance is needed for detecting the
adequate investment options supporting the requirements of Ray and Steve.
Applicants:
Applicant 1: Ray Murdoch
Applicant 2: Steve Brown
There are different types of letter of Credit, which are relevantly used by companies to support their
purchases. The different type of letter of credit are depicted as follows.
Line of credit loans: This type of loan relevantly allows the business to borrow relevantly funds for
purchasing purpose, as the overall interest rate is depended on the high level of amount used for purchase.
Balloon loans: This type of loan relevantly allows the business to acquire the required amount to support
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their purchase while paying only interest from the day of executing the loan till the day of its completion.
Instalment loan: These types of loans is relevantly paid on monthly instalments, which consists of the
principle payments and interest on the loan. The loans are mainly written for business, which require the
capital for meeting their business needs.
Therefore, the use of line of credit method can be helpful for Ray and Steve to acquire the required funds,
which might support the need for relevant equipment. Hence, with the line of credit method the overall
loan for the equipment can be acquired, which will allow the possibility for the import of the equipment.
There is relevant good loan option, which can be used for purchasing the equipment.
1. NAB Vehicle & Equipment Finance
o Interest rate from: 5.49% p.a.
o Interest rate type: Fixed
o Application fee: $500
o Minimum loan amount: $10,000
o Maximum loan amount: $1,150,000
o Maximum LVR 75%
o Repayment of 6,508.60 on monthly basis for a loan of 600,000, where equipment cost is
800,000.
2. Valiant Finance Business Loan Broker
o Interest rate from: 9% p.a.
o Interest rate type: Variable
o Application fee: $500
o Minimum loan amount: $5,000
o Maximum loan amount: $1,000,000
o Maximum LVR 90%
o Repayment of 9,120.66 on monthly basis for a loan of 720,000, where equipment cost is
800,000.
3. Moula Business Loan
o Interest rate from: 5.40% p.a.
o Interest rate type: Variable
o Application fee: $500
o Minimum loan amount: $5,000
o Maximum loan amount: $1,250,000
o Maximum LVR 85%
o Repayment of 7,346.14 on monthly basis for a loan of 720,000, where equipment cost is
800,000.
The best recommended option for equipment loan is NAB Vehicle & Equipment Finance, which might allow
Ray and Steve for adequately supporting 75% of the total loan, while the repayment of the loan is lower
and has fixed interest rate.
There is relevantly loan process, which needs to be fulfilled for acquiring the equipment.
Step 1: Sanction of Equipment Loan
Step 1: Disbursement of Equipment
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Step 3: Documents for the disbursement
Step 4: Lawyer report on Documents
Step 5: date and amount for down payments
Step 6: Transaction documents
Furthermore, the documents for the loans is also required, which mainly needs Ray and Steve for
completing loan requirements.
 Providing financial statements of the business
 ID documents of both the individuals
 Proof of available funds
 Statement of business transactions
 Providing relevant equipment insurance, while details of guarantee and warrantee from the
manufacturer of the machine
The major client responsibility of Steve and Ray is to provide all the relevant information regarding the
current operational functions of the business. In addition, the overall profit figures need to be provided by
both the individual for detecting the requirements of loan.
There is certain risk that might be face by both Steve and Ray, as it supplies 80% of the total production to
one client, which relevantly signifies the level of problems faced by both the individuals. The relevant
inflation risk can also be detected from the current exposure, where any decline in the value of will
negatively impact both Steve and Ray.
There is no personal guarantee needed from the spouse of the directors, as the overall business income
and their personal income is adequate to support the business loan.
The relevant fees and charges for the setup is mainly acquired by the seller, while no expenses will be
borne by both Steve and Ray.
Other relevant disclosure needs to be conducted by both the individual for depicting their financial
condition to the loan provider, for allowing them to make adequate decisions. Disclosures such as their
assets, income proof, liabilities, and current loan requirements.
Detecting any kind of further questions and transactions that needs to be provided by both the individuals
regarding the current loan requirements.
Assessor feedback for Task 2a: Resubmission required?
Yes
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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. 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
Response
Dear Sir/Madam,
The letter is written in view of the loan proposal, where all the details referring the proposal, client’s
financial condition and loan application is adequately addressed.
Borrowers
 Ray Murdoch
 Steve Brown
Address
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
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Client Ray Murdoch Steve Brown
Value $400,000 $400,000
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
Borrowers background and History:
Client Ray Murdoch Steve Brown
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 payment
@3%
$10,000 limit with debt of $3,000 payment
@3%
Car loan $0 $15,000 repayment $746p.m., remaining term
4 years
Overview of the proposal:
The equipment that is required for the purchase is relevantly stimulated at the level of $800,000, while the
overall LVR values is recorded at 75%, where the loan from NAB Business equipment finance is mainly
selected. The overall monthly repayment is calculated at the values of 6,508.60, while the interest rate is at
the levels of 5.49%. The loan term is mainly for 10 years, which can be used by both the individual to fund
their equipment and adequately make payment.
There are no security/collateral that is relevantly charged for the equipment loans, while the overall
equipment that is being purchased by both the individuals will be considered as the property of the lender
until full payments are not provided by the borrower.
The above tables directly represent the overall borrowings of the directors, which can have impact on its
overall Debt Service Cover Ratio.
Fund-to-Complete Structure:
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Particulars Value
Client/s Name : Ray Murdoch & Steve Brown
Equipment Price $800,000
Other Estimated Expenses -
Lenders Loan Application Costs $500
Registration of Mortgage $120
Register of transfer of title $120
Rate Adjustment & Miscellaneous $500
TOTAL COSTS FROM ABOVE $801,240
Less Loan from Bank $600,000
Monthly repayment calculated at
$6,508.6
0
There are certain risks involved in the loan process, where the risk is only involved in business process, which have
negative impact from operations. The business risk can negatively impact capability of the individuals for supporting
their loan requirement.
The loan term and repayment structure can be in accordance with ATO consideration, or with State legislation
requirements. This combination repayment structure might directly have impact on repayment conditions of the both
Ray Murdoch and Steve Brown.
Further confirmation is relevantly provided by Ray Murdoch and Steve Brown regarding their capability to support
their loan requirements and pay adequate money for their business. The business currently has cash of $25,000 with
$220,000 value in debtors and $100,000 in creditors.
The loan application does not hold any kind of collateral conditions, where the equipment used for the purchase can
be determined as a collateral for the loan.
The overall details of the both Ray Murdoch and Steve Brown is adequately depicted in the above tables, where the
debt condition of both Individual are detected. In addition, both the periods adequately hold relevant assets to
support the loan if business performance is deteriorated, which reduces their capability to support the loan repayment
conditions.
The company has total income for two years at the levels of $200,000 and $220,000, while the current interim profits
is mainly at the levels of $200,000 for 10 monthly trading period. Furthermore, information is also provided which
indicates that $1million in orders have been confirmed for the next 3-month period. Moreover, the orders are from
several clients, which adequate diversify the income from debtors and generate higher income from operations.
The client has met all the relent reequipments of the loan process, which allow them to be eligible for the equipment
loan. Hence, the bank can approve the loan application of Ray Murdoch and Steve Brown, they have the required cash
inflow, income and assets to support the loan requirements.
The relevant attachments and documents are provided for the relevant loan proposal.
 Business transaction Statement
 Financial statements
 Directors Payslip
 Selling Contract with regular clients
 Credit card statements
 Preliminary assessment documents
 Identification Documents
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 Income Tax return for last two years
 Signed Personal Consent form
The above information directly indicates all the relevant information and documents that is required for the loan
proposal. Moreover, do not hesitate to contact me if the any further documentation is required for the proposal
purpose.
Thank you
Regards,
Assessor feedback for Task 3a: Resubmission required?
Yes
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Assessor feedback:
[insert feedback]
Date assessed: Click here to enter a date
Does the student need to resubmit? No
Questions that need to be resubmitted
First submission Not yet demonstrated
Resubmission Not applicable
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