64267279 the Report for ULC

8/13/2019 64267279 the Report for ULC

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United Leasing Company is a top rated Non Banking Financial Institute in Bangladesh. It is operating

its business with clear vision and young talented management team. Credit department is the most

important department or any NBFI. ULC has divided their credit department in ! segments one iscredit small enterprise and another one is credit corporate and medium enterprise. Both the credit

department ollows the same credit analysis guide line. "he only basic dierence is during credit

analysis period visit is mandatory or Credit small and it#s not mandatory or credit corporate. In my

report I tried to ocus on how ULC has implemented eicient credit analysis system.

"he report $$Implementing %icient Credit &nalysis 'rocess o United Leasing Company (ULC)

Limited## is the outcome o Internship 'rogram under Credit *mall %nterprise o United Leasing

Company (ULC) Limited. Internship 'rogram is a precondition or ac+uiring BB& ,egree- which

gives a perect opportunity to blend our theoretical knowledge with practical eperience rom acertain organi/ation. 0nly curriculum activities are not enough or handling the real business

environment- so it is necessary to get the better knowledge about the real scenario o an organi/ation.

"he prime ob1ective o the internship program is to provide prospective undergraduates with on the

1ob eposure and an opportunity to apply theoretical knowledge so ar received into real lie situation

and the ob1ective o the internship report is to meet the re+uirement or the degree o BB&. Now- the

ob1ectives o this report are being illustrated below2

"o know about overall scenario o United Leasing Company. "o illustrate the organi/ation proile- structure and perormance. *0" &nalysis o United Leasing Company. "o illustrate its products and4or services and their beneits and costs. Finally- to give an overall and clear idea about Implementing %icient Credit &nalysis *ystem.

"his report solely deals with the ULC and the primary emphasis has given to Credit analysis system

o United Leasing Company (ULC) Limited. "he pro1ect is base on both primary and secondaryinormation.

Primary Source:

5ainly inormation or eicient credit analysis system had been collected through taking interviews

rom ULC employees. ( 5r. 5ahmudur 6ahman 7han- 5anagement "rainee- Corporate Credit 8 5r.

&si Ul 9a+ue- 0icer: Credit *mall %nterprise)

Secondary Sources:

0icial eb *ite o ULC (www.ulc.com.bd)

&nnual 6eports o ULC (!;;


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"he ma1or limitation I aced in preparing this report was the sensitivity o the data. &s it is a

highly competitive market- i the margin inormation is released to other competitors- it may

have a negative impact on their business. 6esultantly- in some cases management were reluctantto give some speciic data.

Limitation o time was one o the most important actors that shortened the present study. ,ue to

time limitation many aspect could not by discussed in the present study.

Conidentiality o data was another important barrier that was conronted during the conduct o

this study. %very organi/ation has their own secrecy that is not revealed to others. hile

conducting interviews with dierent personnel did not disclose enough inormation or the sake

o conidentiality o the organi/ation.

United Leasing Company (ULC) Limited is the second oldest leasing company in Bangladesh. It

started its operation back in =< as a 1oint venture with reputed oreign and local sponsors.

Incorporated as a public limited company under the Companies &ct =


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&uthori/ed Capital o ULC is "k. =;;; million and issued- subscribed and paid up capital is "k. =?;

million. "he sponsors and their current shareholding in the company are as ollows2

Shareholding Structure of ULC

General

Public

23%

Foreign

20%Institutional

44%

Local

13%

General Public Foreign Institutional Local

*hareholding *tructure o ULC.

Its Board o ,irectors consisting o nine members who are the nominees o the Institutional

*hareholders supervises the Company#s management. "he Board appoints the Chairman rom among

the ,irectors.

Ta,-e +!2 Board o ,irectors. (ULC &nnual report !;;


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"he Company policy is to attract- motivate and retain top +uality inancial service proessionals. &t

present ULC#s sta strength is =>D. "here are si branches in ,haka- Chittagong- @a/ipur-essore-

*ylhet- Bogra. "he 5anaging ,irector with the power and authority vested in him by the Board o

,irectors manages the overall operation o the Company.

&n %ecutive Committee o the Board o ,irectors comprising o three ,irectors nominated by theBoard and the 5anaging ,irector approve lease proposals- periodical accounts and other

administrative matters.

"he Board o ,irectors comprising the 5anaging ,irector and three other directors nominated by the

Board appoints the %ecutive Committee. "he Committee is authori/ed to approve all inancing

proposals without any limit sub1ect to the eposure limit speciied in the policy statement. It also

reviews periodical accounts and other administrative matters.

"he Board has given authority to the 5anaging ,irector or approval o lease proposals up to anamount o "aka =.; million in the case o new lessees and up to "aka !.D million in case o eisting

lessees.

9ere- organi/ational structure o United Leasing Company Limited has been illustrated.

!.%.1 /ecui2e Commiee

!.) ORGAN#3AT#ONA'STRUCTUR


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Name and designation o management personnel are given below2

Ta,-e +%2 5anagement o ULC. (ULC web site)

!.).1 &ana4emen


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Name Desi4naion

&r. Syed 5san6uadir : &ana4in4 Direcor

&r. &. A. A7im : De8uy &ana4in4 Direcor

&r. &. Aau-Ho9ue : Genera- &ana4er Com8any Secreary

&r. &d. Din #s-am &ia5 : C5ie Financia- Oicer

&r. &o5iuddinRasi&ors5ed

: Head o Ris; &ana4emen01< Cor8orae

Syndicae Financin4 Financia-

#nsiuion

&r. 6ua7iNi7am A5med : Head o #n2esmen &ar;ein4

&s. 2a Ra5man : Head o C5anne- Financin4

&r. Fa5adRa5man : Head o ner8rise Financin4

&r. &d. A,u-A5san : Head o Sma-- ner8rises Financin4

&r. "ama- &a5mud C5oud5ury : Head o CSA& Admin

&r. S5a5idu- #s-am &a7umder : Head o #CT

&s. Sa,rina &e5na7 : Head o Human Resource

&s. S5armi Noor Na5ar : Head o Board Secreariae

&r. &o5ammad Nea7urRa5man : Head o O8eraions

&r. K5anda;erTan,ir #s-am : Head o Credi =sma-- ner8rise>

&r. #mran K5an

: Head o Credi =cor8orae medium

ner8rise>

ULC provides lease inance to the ollowing sectors2

=. "etiles

!. "ransport

3. &pparels and accessories

?. Construction and engineering

D. Financial intermediations

E. Food and Beverage

. 'aper and printing

>. "elecommunications


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Fi4ure !.1: 'oan Poro-io o U'C =Source: U'C Annua- Re8or !++>

Fi4ure !.1: Ne O8erain4 #ncome 8roi aer Ta/

=Source: U'C Annua- Re8or !++>


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Fi4ure !.1: S5are5o-ders e9uiy =Source: U'C Annua- Re8or !++>

Fi4ure !.1: Reurn on e9uiy =Source: U'C Annua- Re8or !++>


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Fi4ure !.1: arnin4 Per S5are Cas5 di2idend


Fi4ure !.1: /8enses 8er a;a aer a/ 8roi



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Sren45s:

It was among the irst in this industry and thereore en1oys irst mover advantages.

&t the moment they are the market leader as they are paying 3!G ,ividend and giving !2=

Bonus *hare to its shareholders this year- which is more than any other leasing company in

the country.

ULC has very high skilled- energetic- hard working and motivated human resources.

ULC believes and practices participative management.

ULC is engaged in product diversiication- this year they have introduced a new product

syndicate inancing and they are also planning to introduce house loan in near uture.

ULC has a very strong client base among the leasing companiesH most o which are the

giant local and multinational organi/ation such as- British &merican "obacco Bangladesh-

9*BC- *+uare- Navana- "ranscom etc.

ULC do not comply undue political inluence.

ith its diversiied business- ULC is better e+uipped to compete in an ever changing and

challenging business environment.

@ea;nesses:

0ne thing might be their lack o commitment to one big huge investment pro1ect since they

do not want to put all their eggs in one basket.

&nother ma1or weakness o ULC is it has a very low pay structure or entry:level

employees- which can become a de:motivating actor.

ULC discriminates private university students and public university ( ,haka University)

students.

O88oruniies:

ith growth in our corporate sector- the demand or lease inancing is also growing and

conse+uently- the lease inancing industry.

&mong visible non:unctioning o development inancial institutions- ailing capital market

and lack o interest o commercial banks in term inancing- the leasing industry remains the

only vibrant inancial intermediaries or the medium term inancing with less than D G non:

perorming loans.

By introducing new products such as house loan ULC can epand its market.

T5reas: Continuously increasing delation rate result into less disbursement o und."here is a clear trend o increasing competition in the lease market with the entry o more

leasing companies and leasing by commercial banks.

%mployees o ULC are not satisied with their low salary structure and other beneits as aresult they can switch to other competing inancial organi/ation.

!.E S@OT ANA'(SSOFU'C


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Lease inancing is the main product o United Leasing Company. "he company started with this

product and with time they have diversiied their product range.

ULC has also introduced 9ire 'urchase scheme in their product portolio. "his will give the clients

other options to choose. "his scheme is allowed only or institutional clients. ULC does not oer this

to individuals.

Lease or 9ire 'urchase is asset inancing whereby the lessor (inancier) gives the right to use an asset

to the lessee (user) against regular payments termed as rent. (ULC eb site)

5ainly ULC does asset based inancing. "he ma1or modes o inance oered by ULC are2

Sa-e and 'ease ,ac;:hen ULC purchases the e+uipment4vehicle rom the client and gives it on lease to the client.

In this case the client will be regarded as the supplier.

'oca- Purc5ase:

hen ULC purchases the e+uipment4vehicle on behal o the client- rom a local supplier.

Forei4n 8urc5ase:

hen ULC purchases the e+uipment4vehicle on behal o the client- rom a oreign supplier.

It is worthwhile to note at this point- that in the case o oreign purchase- the documentation

department prepares the lease agreement only and the rest o the documents are prepared by

the commercial section under the Finance department. But or local purchase- the

documentation department has plenty o work.

Leasing is airly a new concept in Bangladesh and it provides inance or ac+uisition o asset as an

additional source. "he procedures adopted in leasing are ast- leible with minimum documentation.

hat leasing oers is not the money alone- but value added to it in the orm o assistance in ac+uiring

the asset itsel and other services. In a situation where the entrepreneur intends to ac+uire e+uipment

urgently or balancing and moderni/ing without straining the resource otherwise available- leasing

provides an ideal opportunity.

1. Pro2ides u8 o 1++ o 5e cos o 5e e9ui8men:

0ten no deposits or advance payments are re+uired. For a Lease or 9ire 'urchase o very low cost

e+uipment- or a lessee which is a borderline credit risk or when there is a ta beneit arising rom the

lessee making a substantial initial rental. Clearly- any leasing acility- which re+uires rentals to be

paid in advance- is not =;;G inancing. Nevertheless- leasing oten does provide a higher percentage

o inancing than an e+uivalent installment credit acility.

2. Does no ie u8 2a-ua,-e or;in4 ca8ia- or credi -ines:

& leasing acility preserves li+uidity or other more appropriate uses. "here may- however- be other

sources o inance- which a lessee could also tap.

3. Oers cas5 -o ,eneis:

%.+ 'ASF#NANCANDH#RPURCHAS

%.+.1 Ad2ana4es 'ease Finance and Hire Purc5ase


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6entals ied at the inception o a Lease or 9ire 'urchase assist epense budgeting and cash low

orecasting. "he lease term is normally related to the useul lie o the e+uipment.

4. Pro2ides cerainy:

& Lease or 9ire 'urchase is non:cancelable- unlike an overdrat- which is repayable on demand and

may be reduced during a credit s+uee/e.

5. A sound 5ed4e a4ains in-aion:

%+uipment can be ac+uired at current prices and rentals met out o uture earnings.

6. &ay ,e o ,a-ance s5ee:

Leasing is not borrowing and in many countries there is no accounting re+uirement to show leased

e+uipment and the corresponding liability to make uture rental payments on the balance sheet o the

lessee. "his treatment also has the eect o showing an artiicially low gearing.

7. &ay a2oid -oan co2enans or ca8ia- in2esmen resrains:

hile leasing is not legally borrowing and so may circumvent restrictive loan covenants and capital

budgeting- constraint lenders and head oice inancial controllers are now more aware o the leasingloophole. "his eature should not encourage a lessee to overspend.

8. A2oids di-uion o s5are oners5i8:

Leasing may be the only way o ac+uiring the long:term use o ma1or assets re+uired by a business

without increasing the capital base. 0nly a lessor may be willing to seek part o his reward through an

arrangement to share in the residual value o leased assets.

9. Srai45orard:

Leasing and hire purchase minimi/es administrative costs and simpliies ta and accounting

procedures. &sset depreciation normally becomes the lessor#s responsibility. ,ocumentation is

simpliied.

10. Ta/ eicien:

Lease rentals are generally ully ta deductible as operating epenses. "he ta beneits arising on the

ac+uisition o e+uipment may also be maimi/ed through a leasing arrangement by relecting in the

rentals the value o an investment incentive- which because o shortage o ta capacity or other

reason- is not ully available to the lessee.

'ease and Hire Purc5ase #ems:

Industrial 5achinery or %+uipment

0ice %+uipment

5edical %+uipment

"ransport4ehicle

Tenure:

'ease:3 to D years.

Hire Purc5ase:= to !years.

%.+.! Terms Condiions


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&a/imum 'imi De8ends on:

6e+uirement and %+uity'articipation.

5erit o the 'roposal.&odes o Re8aymen:

%+ual monthly installment. 'ayment structured to

clients cash low.

#nsurance Co2era4e:

Leased assets are to be dulycovering all possible risk and premiums are to be paid by clients


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Fi4ure %.+: Finance 'rocedure Lease49ire 'urchase

Besides Financing- Factoring services includes2

*ales Ledger 5aintenance

Collection o 6eceivables

6eporting

On-y Se2en se8s:1. Buyer (customer) places order on seller (ULC client).

!. *eller approaches ULC or approving o actoring acility.%. ULC approves the acility.

%.1 FACTOR#NGOFACCOUNTSRC#$AB'S

%.+.% Finance Procedure o 'ease Hire Purc5ase


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). *eller delivers goods4services to buyer.

?. *eller submit4assign invoices to ULC.

. ULC disburse prepayment to seller.

E. Buyer makes payments against invoices directly to ULC.

ULC reimburses the balance amount to seller ater prepayment- discount and service charges.

Beneis: Reduced #n2esmen in Recei2a,-es: *ellers# receive payment right ater delivery and

thereore sellers# und no longer tied up in receivables.

/8ansion o Business:&s cash lows improve- sellers# can increase business by delivering

higher volume to eisting buyers and also epand business with new ones.

Sa-es 'ed4er Adminisraion:ULC will administer clients# sales ledger or the assigned

customers.

Co--ecion o Recei2a,-es:ULC will monitor and collect the receivables on due time rom

customers.

Hi45 6ua-iy Re8ors: ULC will provide detailed reports on the perormance o client#s

customers that will help the client direct client#s sales eorts.

Sco8e or Addiiona- Financin4:when seller (client) utili/es actoring acility properly- it

will help ULC support the client with other services.

Coss: Discoun:ULC charge competitive discount or prepayment against invoices.

Ser2ice C5ar4e:& nominal service charge is obtained or collecting receivables rom

buyers and providing reports.

(ULC eb site)

"here are three options o ied return investment2

Cumu-ai2e Term#n2esmen:

"he investment will mature to a bulge igure on completion o term. 'roit will be accumulated

and paid along with the original investment on maturity.

Annua- Proi Term#n2esmen:

&llow receiving proit every year against investment. It will help to maintain a regular income

low while keeping the original investment amount intact

&u-i8-e #n2esmenPro4ram:

,epending on time hori/on o uture re+uirement- client may choose between two ollowing

variant2

Dou,-e &oney Reurn2 ,oubles investment on completion o the term.

Tri8-e &oney Reurn:"riples investment on completion o the term.

%.! F#DRTURN#N$ST&NT


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&inimum #n2esmenAmoun:

Ta,-e +)2 5inimum Investment &mount. (ULC ebsite)

#n2esmen O8ion &inimum Amoun =a;a>

Cumulative "erm Investment 3;;;;;&nnual 'roit "erm Investment 3;;;;;

,ouble 5oney 6eturn !;;;;;

"riple 5oney 6eturn !D;;;;

Proi Raes:&ttractive return is oered on the investment products to ensure ast growth o invested unds.

Ta,-e +?2 'roit 6ates. (ULC ebsite)

Amoun Proi Rae

3 Lac:


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Renea-:

'roit accrual will stop on maturity date o the investment unless renewed. &ll renewals will be at

the prevailing proit rate.

Cusomer Ser2ice:

*ervice +uality is not limited to the initiation process. In every interaction that a client will have

with ULC- it will be or a +uick processing o loan or the return o investment when it matures.

(ULC eb site)

It is a short:term inance product that allows credit acility to clients against selected receivables or

supply o goods and services to meet the short:term need. "he credit acility is etended against "aka

receivables only.

&ny company4institutions4irm can avail this acility. &nd the customer that is the companies or irms

or whom the client supplies or perorms services in the ordinary course o client#s business has to be

approved by ULC.

"he minimum loan limit will be "aka = million and maimum will be "aka =; million. &nd a certain

percent o each bills4invoice will be oered in cash to the client. &nd this percent will also be selected

by ULC.

*ame securities that are provided or lease inancing can also be used when clients apply or bill

discounting.

"his acility ranges rom 3; to =!; days. It provides li+uidity to the client and they are allowed toavail this acility ! times per month.

"he mechanism o bill discounting can be summari/ed as ollows2

&ter selling the goods on credit- the client (supplier4dealer) invites his customer4debtor with the

notiication that all monies due on the invoice are assigned to and be paid to ULC- by printing an

assignment clause on the invoice.

&ter entering into the Bi-- Discounin4 A4reemenwith ULC- the client sells the invoice to ULC.

ULC makes prepayment (advances) to client up to a speciic percentage o the invoice value in

accordance with the approval.

ULC assumes the collection unction (obtaining a post:dated che+ue) and sends statements and

reminders to the customer (debtor).

ULC gets the payment and at periodic intervals the details o unpaid invoices and other control reports

are submitted by ULC to the client.

&ter collecting the debt rom the debtor4customer- ULC pays the client the remaining percentage o

the invoice value- ater deducting the service charge- and the discounting charge.

BNF#TS:

%.% B#''D#SCOUNT#NG


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@etting Instant Cash2

&s soon as the client sale the credit they get the instant cash on that credit sales directly rom

ULC. "hus- the client#s cash low is accelerated- purchasing power increases and eventually- their

production and business moves up and credit rating improves.

6elieved o debt Collection2

&s ULC undertakes4assumes- the responsibility o debt collection (obtaining post:dated checks)

on all the invoices actored and the client is relieved o the problems o debt collection.

*ales ledgers is no more your headache2

ULC#s operation is ully computeri/ed and they keep the client inormed through monthly sales

analysis- overdue invoice analysis and debtor payments report. "hus the client is relieved entirely

o the cares and responsibility o maintaining a sales ledger and credit control.

Besides the client gets the beneit o credit inormation systems available to ULC and a wealth o

eperience in the vital business o collecting cash.

CCOSTOST::#neres:Competitive rate

Ser2ice c5ar4e:;.!DG o the total disbursed amount- minimum "k. D-;;; (plus =DG &") and

maimum "k. =;-;;; (plus =DG &") to cover administrative epenses- legal and documentation

costs.

'ro1ect inancing has been introduced rom !;;=. "his is oered mainly to the eisting client basethat has good payment history and long:term relationship with ULC.

Institutions4companies4corporations can apply or this term loan. &pplication should be made on

ULC#s standard ormat. &nd the clients have to provide additional inormation re+uired.

&ny proposal would be processed within shortest possible time. "his will save the client#s time and

aster service would also be ensured.

"he client needs to have ade+uate stake in the pro1ect so that the completion and continuation o the

pro1ect is not solely ULC#s interest. In this case the top management will decide the stake o ULC.

&nd the interest rate will be as per Bangladesh Bank#s regulation.

In consideration o any pro1ect the ollowing aspects will be analy/ed thoroughly2

5arket

5anagement aspect

"echnical aspects

Financial aspects

ULC also monitor the pro1ect and work with the clients or the successul completion o the pro1ect.

%.) PRO"CTF#NANC

%.? S(ND#CATF#NANC


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*yndicate inance is new concept in our leasing industry. "his year United Leasing Co. has also

introduced syndicate inance or a leading industry.

*yndicate inancing is now a very useul and prospective product or non:banking inancial institutes.

Large si/e o inancial intermediation is essential or the industrial development o our country. But it

is impossible or many NBFI#s or the government regulations. &s per Bangladesh Bank rule- ainancial institute can inance at best 3;G o their paid up capital. But a pro1ect might re+uire more

than their said limit. 9ere the syndicate inance is ruitul.

In the syndicate inancing process: there is a leader lessor who makes all types o negotiations-

transactions- documentations- and other ormalities. "he lessee will contact with only the leader

lessor. In echange o those the leader lessor takes the commission- negotiation charge rom the

whole inancial income out o their portion. "he risk o the pro1ect will be distributed e+ually among

all the members o the syndicate.

*yndicate inance has some advantages over lease and other inancial intermediations. Now days it is

considered as one o the most risk ree pro1ect or the inancial institutions. I the huge amount

distributed to many lessees- there has some possibilities or to deault. "he organi/ation has to giveindividual eorts or the individual clients. But in syndicate inancing there is the only particular

client to monitor- and precisely the client should be inancially sound.

).+ CRD#TANA'(S#SPROCSSOFU'C


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Fi4ure ).+: Credit &nalysis 'rocess 0 ULC

0ver the years- ULC has established its line o products and tentative conditions (sub1ect to client

speciication) or dierent inancing modes. "he company is rather conservative in its selling

approach- but that does not sway any substantial number o companies away rom its customer base.

&s one o the ma1or players in the leasing industry- the company has adopted a practice or appraising

prospective clients and their purpose or credit re+uest.

Credit appraisal its into the worklow- as a part o marketing and marketing service activities. In act-

Credit appraisal begins in the marketing department o ULC- right rom the time o customer contact.

Credit &ppraisal is done or dierent inancing modes such as2 Lease and4or *ale and Lease Back-

9ire 'urchase and Bill ,iscounting.

'eople rom the 5arketing or marketing services department- prepare credit appraisals o both the

new and eisting client. "here is a sanction o lease money or eisting and new clients. Ieisting4new clients wish to borrow within the amount sanctioned by the 5,- a short appraisalJ is

prepared and duly approved by the 5, o ULC. 9owever i the client wishes to borrow above the

sanctioned limit- an eecutive summaryJ is prepared and the 5, recommends this. It is then sent to

the %ecutive Committee this committee may then give their approval or re1ect the appraisal.

Ta,-e +2 *anction o Lease 5oney. (Credit &ppraisal 5anual)

Sancion o -ease money =Ta;a>

A88ro2ed ,y &D Re9uires a88ro2a- ,y C

New clients = million &bove = million

%isting clients !.D million &bove !.D million


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Credit appraisal process o New Clients is done in the ollowing manner2

1. #deniyin4 and #neracin4 i5 Tar4e Cusomers

Inormal sector clients- small:scale sole proprietorships and established medium:scale businesses are

all considered the target market where leasing is concerned. & leasing product is targeted to clients

that can repay a larger loan over a longer term- not necessarily irst: or second:time clients that need

access to credit or working capital. In act- leasing is most appropriate or clients that have outgrown

typical micro inance credit products and have the potential to increase business output and product

+uality by using more sophisticated e+uipment.

& typical leasing client is a repeat loan client on at least the third loan cycle- has eperience using and

managing the leased item- is able to store and care or the item- and has additional income or

appropriate savings to cover the loan payment.

"he marketing department o ULC is mainly responsible or inding prospective clients- inorming

them o the advantages o leaseH in short- to sell the products o ULC. (Credit &ppraisal 5anual)

"he marketing activities begin with the client search. & variety o methods may be used to

accomplish this.

"hey look up the yellow pages or prospective clients.

"hey use personal relations (e.g. associates- riends- relatives) to bring in new clients.

"hey also use business cards to call up companies

&ll o these clients are pursued by ULC. "he company does business with walk:in clients who have

come to ULC on their own as well as those who have been reerred to ULC by their eisting clients.

(Credit &ppraisal 5anual)

For those- whom ULC pursues- the marketing department people have to call them up- inorm them o

the various product choices available- convince them o the advantages and inally persuade them to

consider a product based upon their needs and re+uirements. (Credit &ppraisal 5anual)

!. C-ien C5ec;

0nce it has been established that the client has a need- which can be ulilled by any o the products

oered by ULC- and then the marketing eecutive (5%) o ULC pays a visit to the respective

company premises. "he marketing eecutive visits both the actory and the oices. "he inormation

needed to be gathered2

"he condition o the actoryKthe level o production- reliability o supply o raw materials-

level o unsold stock at hand- demand o the product in the market etc.

"he standing o the company within its competitive environment.

It is imperative or the marketing eecutive to visit the oice and talk with the management

and directors o the company and make a 1udgmental analysis o the type o people in charge

o the company.

"he marketing eecutive also talks to the employees o the company to get their opinion o

their workplace and company activities.

9e also gathers inormation about the 5, or directors o the company rom other respectable

people in society who know about4are in association with them.


).+.1 Credi Ana-ysis Process or Ne C-iens


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3.3. 66%'06"IN@%'06"IN@

"he marketing eecutive reports back to ULC all the inormation he has gathered rom the visit and

other sources. I all inormation seems avorable then the @5 or 5, o ULC- along with the

marketing eecutive- pay a visit to the company#s actory and oices. In this second visit the

conirmation o the report given by the 5%- is made. I the @5 and 5, ind that all is satisactory-

they will tell the 5% to move onto the net step. (Credit &ppraisal 5anual)

"he net step is lease application. ULC has a =!4=E:page application orm- which has to be illed up

by either the lessee himsel or the 5% handling the client. It states inormation such as the legal status

o the companyH bankers o the lessee and ,ocuments such as the 5emorandum o &ssociation o the

company- inancial orecasts and bio:data o the directors etc are re+uired as well. (Credit &ppraisal

5anual)

?. Credit appraisal

0nce the lease application has been made- ULC then prepares an appraisal. "he appraisal is done to

check i the company is o sound inancial strength and whether it would be easible to have dealings

with this company. Inormation on the company as well as description o the e+uipment to be leased-

the terms o the lease (rental- advance etc)- security oered and details o the background o thedirectors and sponsors o the company is given here. Furthermore they appraise a summary version o

the inancial data o the company such as balance sheets- proit and loss accounts- ratios etc. &ll this

inormation is evaluated and a risk rating is assigned to the company. ULC has its own risk

assessment procedure and categories o risk. Companies which receive a risk rating o = are those

with the lowest risk- whereas 3 indicates average risk and D is unacceptable risk. (Credit &ppraisal

5anual)

"he marketing eecutive who has prepared the appraisal assigns this rating to the company. Both the

5% and &@5 sign the document. "he appraisal is then passed on to the @5 who reviews it and gives

it his signature. Finally it is sent to the 5, who can either approve o it right away or say that it is

recommended- in which case it is sent to the %ecutive Committee. "here is a sanction o lease money

or new and eisting clients and 5arketing %ecutives know that the 5, will readily approve thoseappraisals within the limit o lease money. (Credit &ppraisal 5anual)

ULC can ask or or the company may give security such as2

*honchoy 'otro

F,6

Bank @uarantee

Corporate and4or 'ersonal @uarantee

Land

Flat

*hares4stock

*upplementary Lease ,eposit (*L,)

ULC accepts many applications with the sole security o personal guarantee o the directors o the

company. "his appears attractive to prospective clients because they know that bank loans will re+uire

much more security. &ter the appraisal has been approved or recommended by the 5,- the net step

is preparing the Lease &greement. "he people working in ,ocumentation45arketing *ervices prepare

this agreement. "he lessee and the 5, o ULC then sign it. "hen ,isbursement o unds take place

i.e. the unds are given to the client. Lastly- repayment comes as the se+uential activity. Clients repay

the leased upon amount depending on which mode o payment (lease- hire:purchase) they have taken

and the conditions stipulated in the agreement or the respective service. (Credit &ppraisal 5anual)

).+.! Credi Ana-ysis Process or /isin4 C-iens


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It takes approimately 3;:?D minutes to prepare a short appraisal or an eisting client- i all the

necessary inormation is readily available and not many changes are to be made rom the previous

appraisal done or the same client. For lease proposals4eecutive summary- it may even take an entire

day to prepare the appraisal- especially i all inormation is not readily available.

1.1. CCONTACTONTACTANDAND#N#T#A'#N#T#A'D#SCUSS#OND#SCUSS#ON::

"he credit appraisal process begins with the client contact and initial discussion. &n eisting client

may contact a marketing eecutive rom the ULC marketing department with a new re+uest or credit.

In this initial discussion- the 5arketing %ecutive has to ind out the client#s re+uirements and suggest

a leasing service suited to serve the client needs. "he 5arketing %ecutive has to consult the

&@545arketing 5anager beore reaching any negotiation with the client. "he 5arketing 5anager

approves the inancing option (i.e. lease4sale and lease back4hire purchase4term loan) and determines

the rate o interest to be charged to the client in +uestion. "hen the appraiser45% collects the

ollowing documents rom the client2

ULC application orm illed up by the client (or by the 5% on behal o the client)

Lease application on the company letterhead (o the client#s) as per the ormat o ULC

Auotation4 'ro:orma invoice o the supplier.

Financial accounts o the past 3years


2.2. Reerrin4 o /8osure:

In case o eisting clients- the marketing eecutive will now reer to eposures (rom iew !=:

company sotware) o previous and eisting lease agreements o the whole group. I it is nil on iew

!=- it means all agreements have been terminated. (Credit &ppraisal 5anual)

"he Lease &greement (L&) eposure shows the L& numbers and the marketing eecutive takes note

o the last L& done with the eisting client. Files are organi/ed as per the L& numbers so the

appropriate ile is then looked up. "he marketing eecutive checks who had prepared the appraisal or

the last L&- i he did it himsel it will be on his pc- otherwise he gets a copy o the appraisal rom the

person who did it. 9e works on this copy and changes inormation- which are speciic to the new

lease agreement (such as e+uipment description- lease conditions- business and market (i any

dierences are epected as a result o installing the new e+uipment- security). (Credit &ppraisal

5anual)

3.3. Gein4 Ne 'ease Recei2a,-es =N'R>:

"he marketing eecutive will be able to get the Net Lease 6eceivables (NL6) o all agreements withthe client rom the eposure- ecept or the Net Lease 6eceivables (NL6) on bill discounting

agreements. "his inormation is sought rom the accounts department. "he Net Lease 6eceivables

(NL6) amount is mentioned in the appraisal under the section @roup %posure. I there is any

uneecuted agreement- that amount too is speciied in group:eposure. (Credit &ppraisal 5anual)

In the group eposure- the marketing eecutive has to give the NL6 o all other companies under the

group name o the client (which includes all the agreements i.e. 9ire purchase- term loan- lease) plus

the proposed eposure (i.e. the ac+uisition cost o the pro1ect being appraised) and thereore- show the

total amount o eposure. (Credit &ppraisal 5anual)

4.4. S8eciic securiy oered ,y 5e c-ien:

Net- the marketing eecutive has to state the speciic security oered by the client or the currentlease4hire purchase4term loan being applied or. @enerally- clients oer either4both personal or4and


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corporate guarantee. *ometimes the total worth o assets belonging to the company4director is

mentioned in the security section- especially i it is a substantial igure. (Credit &ppraisal 5anual)

5.5. Bac;4round and Credi #normaion:

Net comes the background and credit inormation. For eisting clients- the marketing eecutive

makes little changes in this section (because it is unlikely that the background o the company willever changeM)H s4he only checks to see i anything new needs to be added in terms o credit

inormation. For new clients- the entire section has to be typed up. (Credit &ppraisal 5anual)

In creditors- the marketing eecutive must state ULC as a creditor (or eisting clients) and mention

the current date (e.g. ULC as on ;3.;3.!;;?). &ny other creditors should be mentioned here. It is also

important to state the bankers o the client- with whom they have transactions. It must be noted that at

this point- the marketing eecutive is concerned only with the creditors and bankers o the individual

company dealing with ULC and not the group as a whole. (Credit &ppraisal 5anual)

6.6. Business and mar;e:

In this section the marketing eecutive discusses the market served by the client- the product4service

they oer- and their customer base. "he client#s market share- production capacity are also mentioned.(Credit &ppraisal 5anual)

7.7. #m8ac o inance:

"his section is applicable only in the case o e+uipment4vehicles being leased- and not when private

cars are being leased. "his basically eplains the use o the current inance or the impact o it on the

production capacity4sales4cost o the client#s operations. (Credit &ppraisal 5anual)

8.8. Financia- daa:

"he marketing eecutive reports a summary version o the client#s inancial statement (balance sheet

and 'roit 8 loss account) or the last 3 years. Unusual trends are noted and backed by an eplanation

e.g. 6ise in assets o a period. "he marketing eecutive also calculates the debt e+uity ratio rom theinancial statements and eplains any signiicance denoted by this ratio. "he 5arketing %ecutive

consults the &@545arketing 5anager- whoever was responsible or soliciting the client. For eisting

clients- the marketing eecutive can ask i the inancial data given in the previous appraisal needs to

be updated. "he marketing eecutive needs to know i the client will provide the necessary

inormation to ULC on its own or i the marketing eecutive needs to etch it rom them. *ometimes-

where top:notch clients are concerned- the supervisor may instruct the marketing eecutive not to seek

additional inormation on the client#s inancial data. "he marketing eecutive then manipulates certain

data as per the supervisor#s instructions (e.g. Increase by =;:=DG rom last year#s data). &dditional

comments are given in this section i any igure appears etraordinary or there is an unusual trend. For

eample- a rise4all in assets- signiicantly high4low debt to e+uity ratios should be backed by an

eplanation. (Credit &ppraisal 5anual)

&ll this inormation is evaluated and the marketing eecutive assigns a risk rating to the company.ULC has its own risk assessment procedure and categories o risk- which has been discussed earlier.


0nce ULC receives and prepares all the necessary documents- the marketing services department

makes sure that the appropriate people sign them. &n inspection o the e+uipment4vehicle may take

place at this time. "hen the unds are disbursed. (Credit &ppraisal 5anual)


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,uring working with Credit: *mall %nterprise I have ound some problems- which are given below2

Inormation gap among credit oicers and 6elationship 5anagers.

Beore CI6 up loading- 65 does not investigate the client#s documents and relevant

inormation.

65 does not provide correct name in some cases or that credit oicer does not get accurate

CIB report.

Client visit is done by credit oicer (9ead 0ice)- which is time consuming.

%goistic problem among Credit department and 65.

"o solve the above problems ULC authority already has taken some initiative which will help them to

mitigate there problems. 5y recommendation regarding above problems are2

'rovide a workshop to 65 or CI6 and CIB report.

Credit visit will only do when ull application will come to the department.

Client visit will be done by Branch 5anager.

).1 F#ND#NGS

).! R CO&&NDAT#ONS


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Non:Banking Financial Industry (Leasing industry) o Bangladesh is growing very rapidly. "heincreasing demand o leasing and loan are inviting more and more new entrants into the industry.

%ven banks have started oering same acilities at a lower rate than the eisting leasing irms.

5oreover- with the liberali/ation o trade- domestic irms are going to ace hyper competition rom

oreign irms. "o survive the strong competitive wave the uture is going to bring- irms should

collaborate with each other to increase their market share and hence tap the whole domestic market.

ULC is one o the strong market players in the NBFI sector. It#s epanding its business and getting a

strong position in the inancial market. ULC implemented eicient credit analysis system which is

helping them to boost up their business. For eicient credit analysis system ULC can manage almost

?.+ CONC'US#ON


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Re8ors and &anua-s:

=. &nnual 6eport: !;;


28/28

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?.! APPND#CS

Date post:	04-Jun-2018
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64267279 the Report for ULC

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