64267279 the report for ulc
TRANSCRIPT
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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
=Source: U'C Annua- Re8or !++>
Fi4ure !.1: /8enses 8er a;a aer a/ 8roi
=Source: U'C Annua- Re8or !++>
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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.
¬her 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.
(Credit &ppraisal 5anual)
).+.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
(Credit &ppraisal 5anual)
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.
(Credit &ppraisal 5anual)
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: !;;
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&ppendi ;=2
'oan Poro-io
Oear !;;D !;;E !;; !;;> !;; ?=< ??
&ppendi ;32
Ne Proi
Oear !;;D !;;E !;; !;;> !;; ? DD D> E=
?.! APPND#CS