FNS50315 Assessment: Loan Acquisition & Financial Analysis

This document presents a solution to an FNS50315 assessment task involving the acquisition of a loan by Henman Holdings Pty Ltd. Part A focuses on the borrower's perspective, outlining the importance of funds for expansion, key questions to ask when acquiring a loan, and a formal loan proposal. It details parties involved, security, facility details, lender options, and client responsibilities. The document includes process timing, required documentation, and signing authority. Part B shifts to the lender's perspective, providing borrower details, background information, loan purpose, facility details, funds position, asset and liability statements for Ray Hanley and Steve, servicing capacity, and security considerations. This comprehensive analysis offers insights into both sides of a loan transaction. Desklib offers a range of study tools, including past papers and solved assignments, to support students.

FNS50315 Assessment Tasks
1

Table of Contents
Assignment 2..................................................................................................................................3
Part A..........................................................................................................................................3
1...............................................................................................................................................3
2...............................................................................................................................................4
Part B – The Lender..................................................................................................................8
2

Assignment 2
Part A
1.
Funds are important for the expansion and growth of any organization. Ray and Steve which
needs fund for further development and establishment to purchase the assets which can enhance
the productivity. The questions that can be asked acquiring the loan includes various aspects
which are as follows:-
 Details and information related to the parties which are the receiver of the fund?
 The purpose of the acquiring of the loan?
 The value or the amount of fund which is required by the acquirer?
 The details of the current loans and borrowings standing along with advancements?
 The time frame for which the funds are being acquired and the type of interest they are
looking for?
 The securities that can be pledged for the purpose of the loan and if there is any loan
standing on it?
 Description and documents related to the securities that are being held by the borrower?
 Sources available for the providing of the loan and the expectation?
 The financial statements and returns of income tax for the further detailed analysis
 The requirement of cash flow and fund flow for determining the stability of cash in the
organization
 Other critical information and documents to avail the funds from the institution?
3

2.
Introduction
This document is the formal proposal for acquiring the loan by Henman Holdings Pty Ltd for
further development and purchasing of the assets. The assets will be depreciated over the time
thus resulting in a decrease in value which needs to be taken care at the beginning so that there
can be proper agreement and does not affect anyone that is the lender and the buyer.
Parties to the loan
There are different parties involved while acquiring loans such as the institution and its related
parties such as the officer for valuation, agent and other personnel from the lending side. From
the borrowing point the person acquiring the loan, guarantee provider and other. In case of
dealings is done by the broker the broker is also parties to the loan. The parties after analyzing
their particular aspect provide the approval for the acquiring and lending of the loan. The loan
acquired by the Steve and Ray is in the name of Henman Holdings Pty Ltd trust which further
involves other parties also.
Security
The motive of the business is to acquire the loan for the purpose of purchasing the asset and
retaining it for a long time. The assets purchased in the name of trust will help in having tax
benefit and repayment of the loan through the income shown in the rental income. It is important
for the lender to determine that the fund provided will be recoverable from the party. The
security is important as in case of any non-repayment of the loan it can be used to acquire the
funds. The company is planning to repay the loans on the basis of the rental funds.
Facility Details
The facility taken is of $500K by the Steve and Ray and as they are willing to repay the loan as
soon as possible they have acquired the loan for the term of 48 months with the interest of 10%.
They have also rented the additional depot for $6000 to maintain the new assets purchased. The
4

decision regarding borrowing on the basis of installment or on the basis of limit is based on them
itself analyzing various factors.
Lenders Details
The loan is acquired in the name of Henman holding Pty Ltd. There are various options through
which there can be a borrowing of the loan. In case of acquiring Loan from the banks, there is
high security required along with the documentation. The disbursement time is also more in
comparison to the funds being acquired from the private financial institutions. The company can
also look forward to investors to whom the return can be provided after earning the profits.
Confirmation of the complex requirement of the company
The loan is to be acquired in the name of the Trust and also needs to be repaid in the time span of
48 months which needs to be considered. The Asset acquired will be shown as rented through
which the loan will be repaid by the trust. Ray and Steve need to be included in the parties to the
loan as guarantor of the loan are to be acquired by the trust. The transactions need to take care
while showing the assets to be rented so that there is no problem in future related to the funds.
Persons Involved
Lender – The lender is the one who provides the funds to the borrower. There are various
sources through which these funds can be acquired such as the private institutions, banks etc.
Acquirer (Steve and Ray) – The acquirer or the borrower is the one who borrows the funds
from the Lender for various purposes and needs to repay the loan with interest. Ray and Steve
are also acquiring the funds for the further expansion and growth.
Broker – The Broker can be defined as the middleman of the whole transaction who helps in
facilitating the whole process of lending and buying so that there is no miscommunication
regarding the loan.
Valuation Officer – The valuation officer is appointed to determine the correct value of the
security on the basis of which there is an appropriate disbursement of the loan to the borrower.
5

Accountants – The accountants must look forward to the timely payment of the fund and also to
inform and check with the related party.
Responsibilities of the client
The main responsibility of the client is to reveal all the information and detail that can affect the
lending of the loan. Every details, information, and documents provided must be accurate and
true and fair. There must not be hiding of any sensitive information that can further lead to
problems in future. Secondly, it is necessary that there is timely repayment of the loan along with
the interested party. There must not be any delay in the payment from the client side as it affects
the future lending. It is the responsibility of the client that they must also inform the lender in
case of any changes to the parties or any events that can affect the lending party or its payments.
Process timing and client arrangements
There is a various process involved before the loan is disbursed to the client. This process
involves the requirement of the loan, valuation of the assets and security to determine the value
of the loan that can be provided, checking of the financial statements to understand the servicing
capacity of the client and other information. The process time could take around 25-30 days for
the disbursement and acquire the loan.
Documentation
 Details of the borrowers
 The operations through which the loan will be repaid
 Financial statement of the borrower and related parties
 Documents related to the ownership of the security
 Undertaking regarding the funds obtained for the purchase of assets and the use of rental
income for repayment of the loan
 Certificate of valuation officer
 Contract of the loan between the borrower and lender
 Documents other than the above stated that are important for the purpose of the loan
Signing Authority for contract
6

The signing authority would be Steve and Ray from the borrower side and the lender party who
is providing the loan.
Note – The Document presented are true and fair and in the best knowledge of the parties.
7

Part B – The Lender
Borrower’s Detail: The loan has been borrowed from the Henman Holdings Pty Ltd ATF. This
company has been established to purchase the equipment of the trading entity (Henman Holdings
Pty Ltd). Ray and Steve are the directors of the company and the charges to hire it will be equal
to the finance payments. The rent of the company for its expansion will be charged as $6000 pm.
Various subcontractors are engaged to occupy the loss of delivery capacity. There are currently 5
employees working in the organization.
Background: The successful transport company is run by two joint owners Ray Henley and
Steve Manning. Clients of the company are spread over various industry sectors which in turn
imply less business risk. Payment term set by the organization for the creditors is 30 days. The
company has been trading on the market for 34 months which ensures that they have anticipated
sales and volume in their business plan. Before providing the license to the organization to trade
the creditworthiness of the company has been analyzed that reveals that there will be no
unfavorable issues in the future. The loan provided can be repaid in term of 5 years with a return
of amount $45k pa.
Loan Purpose: The loan has been taken from the Henman Holdings Pty Ltd for the purpose of
future expansion. The finance took in next 12 months for the purchase of Trucks and Dogs
Trailer amounted to be $500k. Applicants decided to pay back the liabilities for a period of 48
months term by including GST input credits. As compared to the earlier aspect when for the
establishment of the company the loan was taken for 34 months and the amount accounted was
$500k. So the basic purpose of the loan was the expansion of the same business.
Facility Details: There were various facilities which were taken into consideration by the
company after the idea of expansion of the business. They tried to purchase new trailers and
trucks so as to avoid the issue which was caused by the subcontractors. Also, the old equipment
in the organizations was replaced it with the new one. Loans will be paid back easily and the
applicants are happy that now the sales and profits will line according to the budgets.
Funds Position: The fund's position will now be increased as after the expansion of the project
all the profit, sales and the revenue of the business will be lined up according to the budget. The
8

funds earlier invested to establish a business was $500k which was taken from the private
company and has to be repaid back with the term of 5 years of amount $45k pa. The further
investment which was done so as to increase the business line was amounted to be $500k which
was taken by the company to purchase trucks and the trailers. The company decided to pay back
the debt as soon as possible which is still continuing to as to finance the new equipment.
Ray Hanley
Assets
Property occupied – $850000
Content - $100000
Motor Vehicle - $40000
Superannuation - $550000
Liabilities
Debt with interest of 7.2% per annum - $250000
Credit card limit - $15000
Surplus - $1275000
Steve
Assets
Property occupied – $550000
Content - $85000
Motor Vehicle - $25000
9

Superannuation - $150000
Liabilities
Debt with interest of 7.2% per annum - $350000
Credit card limit - $3000
Debt on Motor - $15000
Surplus - $442000
Cash at bank - $25,000
Debtors- $220,000
Creditors - $100,000
Surplus: $145000
Servicing Capacity
The servicing capacity has been upgraded with the establishment of the expansion. As earlier the
company had to rely on the subcontractors for the delivery of the products now as the loan has
been taken for the purchase of trucks and the trailers so the flexibility will increase and the
reliability on the contractors will also be reduced. This will help in increasing the revenue that
can be generated and result in strong financial position. Through acquiring the loan they will be
able to earn an additional 60k per year which will help in maintaining and even making better the
servicing capacity.
Security
For security purpose, the company has its clients from the different sectors of the market so as to
ensure that the business risk is not identified to the single unit of the market. The organization
has also reviewed all the background by analyzing the financial accounts so as to know the
10

creditworthiness of the company. Analyzing of the creditworthiness will help the organization in
achieving the future growth and to allocate resources accordingly to pay back the debts. Actual
results have also been revealed from the business plan so as to estimate profit and sales
accordingly.
Risk Assessment and Management
The risk is the basic factor involved in all the organization. To save the organization from the
risk factor the employees in the organization must take the steps to reduce the risk by adopting
the risk-free technologies or policies. In case of Henman Holdings Pty Ltd, they have adopted
the policy of targeting the clients from different industry sectors so as to reduce the risk factor
involved in the organization. This policy is adopted if there is a risk in one segment the profits
can be earned from the different segments. The risk is also to the lender of the fund regarding the
repayment of the same. It is important for the financial institution to properly analyze the risk
that is involved in lending of the fund. They must access the financial stability of the company
and also the servicing capacity of the company to repay the same.
Recommendations
It can be recommended to the Henman Holding Pty Ltd that with employing the new transports
ways for making easier the supply that the relationship between the suppliers and the
organization should also be formally maintained. The organization should also focus on the
insurance policy to check the policy rates which has been adopted. Technologies related to the
new and the existing one should be increased so as to lower the risk factor involved. So, at last, it
can be suggested to increase the effectiveness of the organization high qualified vehicles must be
occupied. The Lender must check all the details and documents before the disbursement of the
loan. They must properly inspect the documents and also the assets that are being pledged by the
borrower. They must properly disclose the policies and plans related to the interest payments.
Attachments
 The financial accounts copies for the last three years of the parties related
 Confirmation of the accounts
 Certificates related to the identities of the borrower
11

 Valuation report related to the security and property of the borrower
 Proof of residence and office
 Trust deed
 Contract copy conducted to provide services
 Agreement with the private lender of the funds
 Description of the work that is being carried out
 Statement of the asset related to the already standing liability
 Insurance copy of the assets that are being purchased
 Invoice copy of the assets that are being purchased
 The copy of the lease for the new depot
 Name and other details related to the broker involved
 Solicitor details and information
12