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Customer's and Lender's perspectives

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Introduction

The customer's and lender's perspectives 26 March 2010 BCFS Bank CONTENTS: Executive Summary 5 Introduction 6 Business report 7 Business entity suggested to customers 7 Recommendations to BCFS bank 9 Financial services proposed to business in Canterbury 11 Current trends of retail, leisure and tourism sectors 13 Conclusions 14 Recommendations 15 Appendixes 16 References 17 Executive Summary The aim of this report is to advice Mrs. Lindsey Warner and Mr. Bryan Child (customers) with the most suitable business entity for their enterprise as well as the BCFS bank (lender) about the main considerations when lending money to the customer. Mrs. Warner and Mr. Child plan to start up a business by opening cafe tea room, retail shop with online sales operations and B&B services in Canterbury, Kent. The total amount needed to start up business equals to �2,500,000. It is financed by BCFS bank, other creditors and privately by customers. Mrs. Warner plans to invest �500,000 and Mr. Child - �800,000. Mrs. Warner's equity hold in private property equals to �850,000 whereas Mr. Child's has and equity of �1,600,000 in his property. The business owners are married and possess private houses jointly with their partners. After the comparison of different aspects of various business entities i.e. partnership, private limited company and limited liability partnership as well as consideration of customers' personal circumstances the report concludes: Limited liability company would be the most suitable business entity for Mrs. Warner and Mr. Child. From BCFS bank's point of view it would prefer partnership as owners ultimate choice. Investigation of a wide range of BCFS bank's services succeeded to identify services that are "vital" as well as "recommended" services which are not vital, but customers may want consider them. The analysis of current trends of tourism, retail and leisure sectors certified that the level of disposable income among people is reduced. However business areas of Canterbury have shown a high number of visitors despite difficult economic times. ...read more.

Middle

There a few ways. It is mostly presumable that a �1,000,000 loan will be borrowed in the form of a commercial mortgage. So in case the business defaults the bank will be entitled to sell the Georgian Town House as a direct security. If the value of the property will not be enough to cover the whole �1,000,000 then bank will be entitled to sue the owners of the partnership as their liability is unlimited. Any gap will be recovered by selling customers' private assets chosen by bank as owners of partnership share joint and several liability. If the commercial mortgage will be provided to a limited company the bank will likely ask Mrs. Warner and Mr. Child as company directors to enter into a personal guarantee. By signing such a document the directors will take personal commitment to repay the loan up to �1,000,000. That means Mrs. Warner and Mr. Child would put at risk their own assets which could be repossessed in case they will not be able to repay the loan. So personal guarantee as well as fixed and floating charge (the idea explained in first section of this report) will be indirect forms of security available to BCFS bank. These together with direct security - Georgian Town House will help to minimize risk BCFS may face. All the three forms of security will serve as the ways for lender to get the money back if business is to default. However when BCFS bank is concerning the scenario of repossessing owners' private assets (if there is a need to fill the gap of money borrowed and repaid) there are some conditions to be fulfilled. It is important to note that Mrs. Warner and Mr. Child own their properties jointly with married partners. So the bank has to ensure that husband of Mrs. Warner and wife of Mr. Child understand the risk they are taking with their partners who are starting up the business. ...read more.

Conclusion

By dealing particularly with a limited liability company BCFS bank has to take an additional form of security called personal guarantee from company's directors as well as put in place fixed and floating charge. This report has investigated a wide range of services which include account and accounting, money transmission services all of which are important for daily business operations. Without bank's Lending services money business development would be much smaller and slower. Investing / saving services are not relevant to business in Canterbury since all the money is invested. Protection services cover various types of insurance policies to minimize the risks and avoid financial consequences. Finally advisory services may help the business improve its effectiveness and profitability. Finally even though Great Britain technically is out of the recession tourism, retail and leisure sectors continue to experience difficult times because peoples holiday budgets are tight. But weaker GBP against euro or US dollar, induces more Britons to spend holidays in UK and attracts tourist from overseas and Europe. That would make a positive for customers business in Canterbury. Recommendations It is important for BCFS bank to ensure that all available securities are valid with legal documents settled. Even though the bank has approved to lend money for customers this report is rising the concern about difficult times for the business to face. Credible presumptions emerged from the final part of this report which provides evidence of reduced spending in retail, leisure and tourism sectors. Since 50% of turnover is expected from retail part of the business (coffee tea room) and 30% form luxury B&B (which represents tourism aspect) the awareness of customer's relationship manager should be intensified in case business operations start to show the slowdown. Because of this reason business report underlines the importance of good relationship build with business owners. That would serve as win-win situation. Customers will become loyal, use more and more services, recommend BCFS bank to other potential customers. Meanwhile BCFS bank will know what really is going on in business and may take appropriate measures if necessary. Appendixes Appendix 1 (source: http://tools.currenciesdirect.net/currency-chart/ ) Appendix 2 (source: http://tools.currenciesdirect. ...read more.

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