MATCHING OF LOAN TYPES WITH CUSTOMER REQUIREMENTS Question 1 You are requested b
ID: 2728475 • Letter: M
Question
MATCHING OF LOAN TYPES WITH CUSTOMER REQUIREMENTS
Question 1
You are requested by the Head of Credit of Bank CCC to spot check existing loans of one of the bank branches and to compile a brief report about the extent to which products and the needs of customers were well matched. The following information was retrieved by you. Please provide a brief reason why you regard the match as suitable or not.
Type of loan
Type of customer
Need
Matching good or not?
Recommended form of finance
Reason why matching is good/not good
Overdraft
Small business
To finance holiday of owner
Term loan supported by mortgage over property
Large business
To purchase a residential property in which the Manager of the production plant of the business will stay.
Credit cards for sales staff of company
Large (corporate) businesses
To use as form of payment for regular dining, travelling etc.
Financial lease
Consumers
To purchase a cabin cruiser boat
Term loan with chattel over machines and letter of credit
Farmers
To import machinery that will be used in the manufacturing of products
6 month bank acceptance of $6 million with overdraft replacing it for another 6 months
Large boat manufacturing company
Funds needed for 6 months to pay for material to complete the manufacturing of a commercial boat that has to be built on order. Large contract payment will be used to repay loan.
Revolving credit
Medium size business in a growing marketing environment
The business provides credit to its customers and requires additional working capital
Overdraft supported by industrial mortgage
Manufacturing company
Purchase of industrial land and putting up of a large building for operational business activities
Increase in existing term loan on farm property supported by mortgage on farm
Wealthy consumer
Purchasing of a seaside apartment for investment purchases
Foreign currency seven year variable rate loan financed from bank’s own foreign fund pool and supported by mortgage on financed chattels
Medium size business
Local interest rates in this country regarded as extremely high. Foreign rates much lower for purchase of manufacturing equipment.
Increase in residential mortgage
Consumer
Buy new car. Sufficient equity on existing house mortgage
Personal loan
Farmer
Interim 8 month finance required to cover costs of planting wheat on agricultural property. Loan will be repaid after harvesting.
Factoring of debtors
Small business with good debtor book but no collateral to provide to bank
Working capital to assist business with seasonal liquidity requirements
Increase in credit card limit
Consumer
Finance of best holiday ever
Type of loan
Type of customer
Need
Matching good or not?
Recommended form of finance
Reason why matching is good/not good
Overdraft
Small business
To finance holiday of owner
Term loan supported by mortgage over property
Large business
To purchase a residential property in which the Manager of the production plant of the business will stay.
Credit cards for sales staff of company
Large (corporate) businesses
To use as form of payment for regular dining, travelling etc.
Financial lease
Consumers
To purchase a cabin cruiser boat
Term loan with chattel over machines and letter of credit
Farmers
To import machinery that will be used in the manufacturing of products
6 month bank acceptance of $6 million with overdraft replacing it for another 6 months
Large boat manufacturing company
Funds needed for 6 months to pay for material to complete the manufacturing of a commercial boat that has to be built on order. Large contract payment will be used to repay loan.
Revolving credit
Medium size business in a growing marketing environment
The business provides credit to its customers and requires additional working capital
Overdraft supported by industrial mortgage
Manufacturing company
Purchase of industrial land and putting up of a large building for operational business activities
Increase in existing term loan on farm property supported by mortgage on farm
Wealthy consumer
Purchasing of a seaside apartment for investment purchases
Foreign currency seven year variable rate loan financed from bank’s own foreign fund pool and supported by mortgage on financed chattels
Medium size business
Local interest rates in this country regarded as extremely high. Foreign rates much lower for purchase of manufacturing equipment.
Increase in residential mortgage
Consumer
Buy new car. Sufficient equity on existing house mortgage
Personal loan
Farmer
Interim 8 month finance required to cover costs of planting wheat on agricultural property. Loan will be repaid after harvesting.
Factoring of debtors
Small business with good debtor book but no collateral to provide to bank
Working capital to assist business with seasonal liquidity requirements
Increase in credit card limit
Consumer
Finance of best holiday ever
Explanation / Answer
Type of loan
Type of customer
Need
Matching good or not?
Recommended form of finance
Reason why matching is good/not good
Overdraft
Small business
To finance holiday of owner
no
ODagainstFD or credit card
It isnot good as overdraft is taken in business name for funding its requirements
Term loan supported by mortgage over property
Large business
To purchase a residential property in which the Manager of the production plant of the business will stay.
Yes
It is good as Loan is being take to fulfill the needs of business ie in this case it is for providing quarters for office staff
Credit cards for sales staff of company
Large (corporate) businesses
To use as form of payment for regular dining, travelling etc.
no
Corporate credit cards
Plain credit card take in corporate name should involve payment for personal use
Financial lease
Consumers
To purchase a cabin cruiser boat
Yes
Satisfies personal need
Term loan with chattel over machines and letter of credit
Farmers
To import machinery that will be used in the manufacturing of products
No
Term Loans For Farmers
End use does not Farmers will need machinery for farming and not for manufacturing of products
6 month bank acceptance of $6 million with overdraft replacing it for another 6 months
Large boat manufacturing company
Funds needed for 6 months to pay for material to complete the manufacturing of a commercial boat that has to be built on order. Large contract payment will be used to repay loan.
Yes
Gurantee by bank is required to be given for the order
Revolving credit
Medium size business in a growing marketing environment
The business provides credit to its customers and requires additional working capital
Yes
End use matches
Overdraft supported by industrial mortgage
Manufacturing company
Purchase of industrial land and putting up of a large building for operational business activities
no
Term Loan against property
End use is expansion so term loan will be better
Increase in existing term loan on farm property supported by mortgage on farm
Wealthy consumer
Purchasing of a seaside apartment for investment purchases
yes
End use matches
Foreign currency seven year variable rate loan financed from bank’s own foreign fund pool and supported by mortgage on financed chattels
Medium size business
Local interest rates in this country regarded as extremely high. Foreign rates much lower for purchase of manufacturing equipment.
yes
Considering the Interest factor this will be abetter option
Increase in residential mortgage
Consumer
Buy new car. Sufficient equity on existing house mortgage
no
car /auto loan
According to end use Auto Loan will be better
Personal loan
Farmer
Interim 8 month finance required to cover costs of planting wheat on agricultural property. Loan will be repaid after harvesting.
yes
End use matches
Factoring of debtors
Small business with good debtor book but no collateral to provide to bank
Working capital to assist business with seasonal liquidity requirements
yes
End use matches
Increase in credit card limit
Consumer
Finance of best holiday ever
Yes
Personal Use
Type of loan
Type of customer
Need
Matching good or not?
Recommended form of finance
Reason why matching is good/not good
Overdraft
Small business
To finance holiday of owner
no
ODagainstFD or credit card
It isnot good as overdraft is taken in business name for funding its requirements
Term loan supported by mortgage over property
Large business
To purchase a residential property in which the Manager of the production plant of the business will stay.
Yes
It is good as Loan is being take to fulfill the needs of business ie in this case it is for providing quarters for office staff
Credit cards for sales staff of company
Large (corporate) businesses
To use as form of payment for regular dining, travelling etc.
no
Corporate credit cards
Plain credit card take in corporate name should involve payment for personal use
Financial lease
Consumers
To purchase a cabin cruiser boat
Yes
Satisfies personal need
Term loan with chattel over machines and letter of credit
Farmers
To import machinery that will be used in the manufacturing of products
No
Term Loans For Farmers
End use does not Farmers will need machinery for farming and not for manufacturing of products
6 month bank acceptance of $6 million with overdraft replacing it for another 6 months
Large boat manufacturing company
Funds needed for 6 months to pay for material to complete the manufacturing of a commercial boat that has to be built on order. Large contract payment will be used to repay loan.
Yes
Gurantee by bank is required to be given for the order
Revolving credit
Medium size business in a growing marketing environment
The business provides credit to its customers and requires additional working capital
Yes
End use matches
Overdraft supported by industrial mortgage
Manufacturing company
Purchase of industrial land and putting up of a large building for operational business activities
no
Term Loan against property
End use is expansion so term loan will be better
Increase in existing term loan on farm property supported by mortgage on farm
Wealthy consumer
Purchasing of a seaside apartment for investment purchases
yes
End use matches
Foreign currency seven year variable rate loan financed from bank’s own foreign fund pool and supported by mortgage on financed chattels
Medium size business
Local interest rates in this country regarded as extremely high. Foreign rates much lower for purchase of manufacturing equipment.
yes
Considering the Interest factor this will be abetter option
Increase in residential mortgage
Consumer
Buy new car. Sufficient equity on existing house mortgage
no
car /auto loan
According to end use Auto Loan will be better
Personal loan
Farmer
Interim 8 month finance required to cover costs of planting wheat on agricultural property. Loan will be repaid after harvesting.
yes
End use matches
Factoring of debtors
Small business with good debtor book but no collateral to provide to bank
Working capital to assist business with seasonal liquidity requirements
yes
End use matches
Increase in credit card limit
Consumer
Finance of best holiday ever
Yes
Personal Use
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