Question $3(10$ marks$)$

Read the scenario below and answer the questions that follow:

A client of the bank has conducted his personal banking account in a

satisfactory manner since opening the account $5$ years ago. There are good

fluctuations on the account and no excesses or dishonoured items have been

recorded. A credit bureaux enquiry furthermore indicates that there are no

adverse reports or defaults recorded against his name.

The client approaches you, as he intends starting his own business and would

like to open a business account and apply for a business loan. The client will

manage the business personally on a full$-$time basis. He provides you with a

business plan that indicates that he requires start$-$up capital of R$400000$ to

establish his business. $($His own contribution will be R$200000,$ but he will

require a business loan of R$200000$ to cover the shortfall.$)$ The business plan

includes a conservative projected statement of income and expenses and a

cash flow budget that shows that the business will be profitable and will be

able to repay the loan instalments monthly. The cash flow budget indicates

that the client has already made provision for drawing a monthly salary of

R$30000.$ The client asks for the loan be repayable over a five$-$year period. His

father is willing to support him in the new venture by signing surety for the

R$200000$ business loan $$ and by supporting the surety by ceding a policy with

a cash value of R$320000.$

$3\mathrm{.}1$ Assess the willingness of the customer to repay the business loan. $(3)$

$$ Milpark Education Business Credit BCRE$01-6$ Assignment September $2024$

Page $7$ of $11$

$3\mathrm{.}2$

Note: Do not repeat the information from your response to $3\mathrm{.}1$ when you answer

this question, as marks will not be awarded for your answers. Also, start each of

your answers to this question by first indicating whether the hurdle has been met

or not with a clear YES or NO

and then justifying your answers with information

from the scenario.

Conduct a hurdle test of the viability of the customer$$s new business

venture with reference to the hurdles below:

Important: answer YES or NO

first, and then justify your answer.

$3\mathrm{.}2\mathrm{.}1$ Owner or jockey $(2)$

$3\mathrm{.}2\mathrm{.}2$ Repayment ability $(3)$

$3\mathrm{.}2\mathrm{.}3$ Surety or security. $(2)$