Case Study: Applying for a Bank Loan

a) Mr Hayman is talking to his bank manager. He would like to have a loan to start a small business.

Read the conversation and fill in the details required by the bank manager on the interview sheet.

Bank manager Good morning, Mr Hayman. Do take a seat. How can I help you?

Mr Hayman Good morning. Yes, you may be able to help me. You see, I'm thinking of starting a business of my own and I need some financial advice.

Bank manager I see. What sort of business are you thinking of going into?

Mr Hayman Well, I suppose the best way of describing it is tourism. I'd like to organize European tours.

Bank manager May I ask whether you have ever worked in this field before? I mean you're a teacher, aren't you?

Mr Hayman Yes, I am – a French teacher – and I've organized lots of trips abroad for children.

Bank manager Yes, but have you really looked into the arguments for and against going into business on your own? Have you fully researched the field you're interested in? Have you done a market survey? Have you looked at the competition?

Mr Hayman I must admit I haven't got that far yet. In fact, what I would really like to know from you is, would I be able to get a loan, just short term, to cover the start-up costs?

Bank manager Well, we would have to look very closely at the venture, get the key facts straight. We'd look at the type of company you intend setting up. Then we would need a breakdown of the start-up costs: premises, staff, advertising costs, etc. Then calculate your present assets and liabilities. Let's consider the last point first. What assets do you have which you could offer as security for the loan?

Mr Hayman Well, there's my house; that

must be worth at least £200,000. Then I have some savings, around £50,000, and I have some shares. I would think my total assets would be about £350,000.

Bank manager Shares, eh? And what can happen to share prices?

Mr Hayman Well, yes, I have made some small losses occasionally but I've taken that into consideration.

Bank manager Do you actually own your own house or have you got a mortgage or some other sort of loan?

Mr Hayman I have a very small mortgage.

There's only about £20,000 left to pay over the next eight years and I have no other liabilities.

Bank manager Mmmm. What size loan do you have in mind?

Mr Hayman I thought £400,000 would be enough to get the business off the ground.

Bank manager May I ask how old you are?

Mr Hayman Forty-eight next November.

Interview Sheet

Name ________________________________________________

Age ________________________________________________

Type of enquiry Loan to start up a new business

Type of business ______________________________________

Present occupation_____________________________________

Preparation for business Yes No

Market survey □ □

Competition checked □ □

Breakdown of start-up costs □ □

Present assets Present liabilities

House £_______ Mortgage £______

Savings £_______

Shares £_______

Amount required for loan £_________

b) Discuss with your partners what the bank manager's decision will be in this case. Make reasoned assumptions, using functional words of 'probability' given below.

He'll definitely get the loan because…

He might get the loan because…

He probably won't get the loan

He definitely won't get the loan because…

Role play

Three different groups of inexperienced young business people require capital for their businesses. They all apply to the local branch of Megabank.

The roles are:

1. A junior manager (and assistants) at the bank, responsible for new local small businesses.

2. A group of young people who want to open a small specialist shop selling CDs of black music – jazz, soul, funk, reggae, rap, and some latest trends.

3. A group of young people who want to buy an existing take-away pizza business (the lease on the premises, the kitchens, the delivery scooters, and so on),

4. A group of students who already operate a part-time computing consultancy service, advising small businesses on what hardware and software to buy and how to set up an Internet home page. They need money to buy more computers, on which to try out elaborate new software.

Choose the roles, study further details given in the role cards below, discuss your questions or arguments in groups and act out an interview with the bankers, following the pattern of the conversation in 1.

Role 1

Your bank recently launched a big advertising campaign announcing that it was the friend of small businesses, with the result that everyone with half an idea is coming to you and asking for money. Your superiors expect you to pick out good local investment opportunities. On the one hand, you have previously lent money to young people who lost it all within six months. You want facts and figures – about costs, sales projections, profit margins, repayment periods, existing competitors, the possibility of new competitors entering the market, and the long-term prospects for the market.

_________________________________________________________________

Role 2

You are fans of black music; you think you know what the market wants; you think the market is big enough to make a small shop profitable; you think the existing competition is weak – inadequate selection of music, wrong ambience, etc. Remember that you will probably be talking to someone who knows nothing at all about the kind of music you are interested in. He/she wants numbers. You have to convince him/her that your business will be successful – that is will have, and keep enough customers to make a profit. You have to pay three months' rent in advance for the small shop. You have to buy display racks and lots of CD players and headphones. Your suppliers (record companies, exporters, distributors) expect to be paid within 60 days.

Role 3

Members of the group have been working in the business – answering the telephone, making pizzas and delivering them – for over two years. You know that the business is profitable. The owner wants to leave quickly and is keen to sell to you. You have enough money to pay the rent and the normal bills, but the equipment will cost $40,000. Not only do you have experience in the take-away pizza business, but as business students you know all about accounting, promotions, etc.

Role 4

You are what other people call 'computer nerds'. You know everything about computers. You have spent several hours a day in front of a computer screen since you were nine years old. You have been advising small local businesses for two years and earning good money, but you would like to buy better hardware for yourself. $40,000 would be perfect.

____________________________________________________________________

3. Which definition of the word ‘entrepreneur’ do you find the most comprehensive? Explain your choice.

a. Someone who uses money to start businesses and make business deals.

b.A person who attempts to make a profit by starting their own company or by operating alone in the business world, esp. when it involves taking risks.

c. A person who shifts economic resources out of an area of lower and into an area of higher productivity and yield.

d. A person who takes the risks necessary to organize and manage a business and receives the financial profits and nonmonetary rewards.

 

3. Comment on the following quotation:

"Business is a game, the greatest game in the world if you know how to play it." (Thomas J. Watson Sr.).

5. Give arguments to prove the need for more governmental support of small businesses in the Republic of Belarus.

6. Get ready to discuss the topic "Keys to Success in Business", use the following outline:

- Are entrepreneurs born or can entrepreneurial skills be acquired?

- What are the major personal traits that a person must possess to be a successful entrepreneur?

- What knowledge and skills are necessary for a successful entrepreneur?

7. Find detailed information about a business success story and present it to your group mates; make an emphasis on the reasons of success.

WRITING

1. You just nabbed a plum job (заполучить теплое местечко) joining a team of consultants writing an advice column, "Dear Dr. Decisive," for the local newspaper. Yesterday you received your first letter.

 

Dear Dr. Decisive,

 

Yesterday, my boyfriend and I got into a high-spirited discussion about lucky people in business. I say that most successful businesspeople are just plain lucky. They've been in the right place at the right time. He says that these successful people have worked hard preparing themselves for the time when they will be in the right place at the right time. OK, I think we're saying the same thing. He says there is an important difference. Now he won't call me unless I admit I'm wrong (which I'm not) or until you say I'm right. I'm right, right?

 

Call me "Lucky."

 

Write a response to "Lucky."

2. Write an essay of 250 words about the role of small business in your own country, support your judgements with statistics.

3. Imagine that you are thinking of starting a business of your own. Give a short description of this business in a paragraph of about 70-100 words.

SUPPLEMENTARY READING

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