Case Study.

Alfred Jerico, President of AJ Enterprise applied for a loan of 200,000 pesos from
FNCB. The bank requested financial statements from AJ Enterprise as a basis for
granting the loan. Alfred Jerico has told his assistant to provide the bank with a balance
sheet. Alfred Jerico has decided to omit the other financial statements because there
was a net loss during the past year.

1. Is Alfred Jerico behaving in a professional manner by omitting some of the financial

statements?

2.) A.) What types of information about their business would owner be willing to provide
bankers?

-Bankers want to make successful business loans. They look for

companies that own assets such as machinery or buildings that can be pledged
as collateral. Bankers like to see a healthy flow of revenues and, for a start-up,
at least one year of successful operations. When applying for a business loan,
come prepared with paperwork and information that will show the banker that
the money you borrow will be used to strengthen your company's financial
health and make it likely that the loan will be repaid on time.

Business Plan

Update your business plan to include the project you are seeking to
finance. Show the research that supports the likelihood of project success.
Describe in detail the uses of the loan money and how the money will contribute
to the creation of revenues. A business plan will allow the banker to quickly
understand your business model and revenue model. The more the banker
knows about your business, the easier it is for him to suggest ways to improve
your chances for a loan.

Financial Records

Copies of your complete financial reports and tax returns should be

ready for your first meeting. Cash flow statements are particularly important. If
you have undertaken cost reduction procedures, bring a report that shows the
results of your efforts. If there are areas where you could reduce costs; present
a plan for achieving those cost reductions. The more you demonstrate your skill
as a manager of a successful business the better your chances of getting a
loan. If your banker has to repeatedly ask for more information, he will have
less time to spend on finding solutions to your funding needs.

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Supporting Documents

Contracts with large customers, marketing plans, invoices, sales reports,

papers evidencing ownership of assets that can be used as collateral, patent
and trademark information and anything else that supports value in your
company should be shown to the banker.

-Owners are generally willing to provide bankers with information about

the operating and financial condition of the business, such as the following:
Operating Information:
Description of business operations
Results of past operations
Preliminary results of current operations
Plans for future operations
Financial Condition:
List of assets and liabilities (balance sheet)
Estimated current values of assets
Owner’s personal investment in the business
Owner’s commitment to invest additional funds in the business

B.) What type of information would owners not be willing to provide?

-Owner’s are normally reluctant to provide the following types of

information to bankers:

Proprietary Operating Information.

Such information, which might hurt the business if it becomes known by

competitors, might include special processes used by the business or future
plans to expand operations into areas that are not currently served by a
competitor.

Personal Financial Information.

O w n e r s m a y h a v e l i t t l e c h o i c e h e r e because banks often

require owners of small businesses to pledge their p e r s o n a l a s s e t s a s
s e c u r i t y f o r a b u s i n e s s l o a n . P e r s o n a l f i n a n c i a l information
requested by bankers often includes the owner’s net worth, s a l a r y , a n d
other income. In addition, bankers are usually
r e q u e s t i n g information about factors that might affect the
p e r s o n a l f i n a n c i a l condition of the owner. For example, a pending
divorce by the owner might significantly affect the owner’s personal wealth.
C.) What types of information about a business would bankers want before
extending loans?

D.) What common interest is shared by bankers and business owners?

Reference
https://bizfluent.com/info-8015387-types-business-owners-provide-bankers.html
https://www.coursehero.com/file/p7iu9md/2-a-Owners-are-generally-willing-to-provide-bankers-
with-information-about-the/