1. Case Study: Applying for a Bank Loan

a) Mr Brown 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 man-

ager on the interview sheet.

Bank manager Good morning, Mr Brown. Do take a seat. How can

I help you?

Mr Brown

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 Brown

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 Brown

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 Brown

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, ad-

vertising 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?

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Mr Brown

Bank manager

Mr Brown

Bank manager

Mr Brown

Bank manager

Mr Brown

Bank manager

Mr Brown

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.

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

Well, yes, I have made some small losses occasionally

but I’ve taken that into consideration.

Do you actually own your own house or have you got

a mortgage or some other sort of loan?

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.

Mmmm. What size loan do you have in mind?

I thought ₤400,000 would be enough to get the busi-

ness off the ground.

May I ask how old you are?

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 ‘prob-

ability’ given below.

He’ll definitely get the loan because…

He might get the loan because…

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He probably won’t get the loan

He definitely won’t get the loan because…