21 Mead Road, Swansea, Glamorgan 3st1dr

Telephone: Swansea 58441 VAT No. 215226130

Telex: 881821

The Manager 10th August 20—

Welsh Co-operative Bank

Seaway House

Glendower Road

Swansea

Glamorgan 8RN 1TA

Dear Mr Collis,

Thank you for your letter of-8th August. Please allow me to apologize for my oversight in not realizing I had a debit balance on my current account.

The reason I did not realize I had overdrawn my account was because I had received a post-dated cheque for £300.00 from a customer which had not been cleared. However, to avoid a repetition I have transferred £500.00 from my deposit account and this should ensure against overdrawing in future.

Thank you for allowing the credit transfer to Homemakers to go through despite the debit balance it created.

Yours sincerely,

R. Hughes

9.3,3

Reply to advice of an overdrawn account

Mr Hughes is aware that the credit transfer could have been stopped, which would have been embarrassing to him, especially as he had arranged monthly settlements with Homemakers only recently (see 8.5.1 and 8.5.2) and there had earlier been a problem over a credit transfer (see 6.6.5 and 6.6.6).

Questions

1. Why had Mr Hughes overdrawn his account?

2. How does he make sure it won't happen again?

3. What does 'oversight' mean?

4. Why hadn't the £300.00 cheque been cleared?

9.3.4

Request for an overdraft or loan

In this letter Mr Cliff of Homemakers Ltd. wants to obtain either an overdraft or loan to expand his furniture factory. He asks for an appointment to discuss the matter, and explains why he needs the money.

Questions

1. What new line does Mr Cliff want to put on the market?

2. Why does he need the loan or overdraft?

3. Why is he sure he can repay the loan?

4. What evidence does he offer to show his company is in a healthy state?

5. What security is he offering?

6. What is a balance sheet?

7. Which words in the letter correspond to the following: talk about; enlarge; put together; gone further; meet (orders); assess; checked (by an accountant)?

HOMEMAKERS Ltd.

54-59 Riverside, Cardiff CFI 1JW

Registered No. С135162

Telephone: (0222) 49721

Telex: 38217

18 September 20—

The Manager

Barnley's Bank Ltd.

Queens Building

Cathays Park

Cardiff CF1 9UJ

Dear Mr Evans,

I would like to make an appointment to see you to discuss either a loan or overdraft to enable me to expand my business.

Over the past year I have been testing the market with a new line -furniture assembly kits - and have found that demand for these kits, both here and overseas, has exceeded my expectations. In the past six months alone I have had over £60,000 worth of orders, half of which I could not fulfil because of my limited resources,

I will need a loan for about £8,000 to buy additional equipment and raw materials. I can offer £2,000 in IBM ordinary shares, and £3,000 in local government bonds as part security for the loan, which I estimate will take me about nine months to repay.

I enclose an audited copy of the company's current balance sheet, which I imagine you will wish to inspect, and I look forward to hearing from you.

Yours sincerely,

R. Cliff

Encl.

BARNLEY'S BANK Ltd

Chairman: B. Davenport F.i.D. Directors: B.R. LewinV.C.. D.F.C..C.I.S. A.L BrodwinA.I.C.A. N.CHARDIS	Telephone: (02221 825316 Telex: 841132 Fax:(0222)613625 Reg. No: Cardiff 3516614	Head Office: Queens Building Cathays Park Cardiff CF1 9UJ

Mr. R. Cliff Date: 27 September 20—

Homemakers Ltd.

54-59 Riverside

Cardiff CF1 1JW

Dear Mr. Cliff,

With reference to our meeting on 23 September, I am pleased to tell you that the credit for £8,000, which you requested has been approved.

I know we discussed an overdraft, but I think it would be better if the credit were given in the form of a loan at the current rate of interest which is 15 per cent, and which will be calculated on half-yearly balances.

The loan must be repaid by June 20— and we will hold the £2,000 IBM ordinary shares and £3,000 local government bonds you pledged as security, We agreed that the other £3,000 was to be guaranteed by Mr. Y. Morgan, your business associate, and I would appreciate it if you could ask him to sign the enclosed guarantor's form, and if you would sign the attached agreement.

The money will be credited to your current account and available from September 30 subject to your returning both forms by that time.

I wish you luck With the expansion of your business and look forward to hearing from you.

Yours sincerely,

I. Evans

Manager

Encls.

9.3.5

Grant of a loan

The bank manager has now seen Mr Cliff and checked his accounts to make sure that the business has been doing as well as the owner said. He has considered the matter of the overdraft or loan, and is now replying.

Questions

1. Is the bank manager going to give Mr Cliff an overdraft?

2. If he is not giving him an overdraft what has he suggested?

3. What does the bank manager propose to do as there is not sufficient security to cover the credit?

4. Who is Mr Y. Morgan?

5. How is the interest on the credit to be charged?

6. When will the credit be available from?

7. Which account will the loan be paid into?

8. Which words used in the letter correspond to the following: paid back; promised; someone known in business; contract?

9.3.6

Refusal of an overdraft

Mr Ellison's company owns a chain of petrol stations and garages. He is also a customer of Barnley's Bank and has also asked for an overdraft, but in his case the bank is not willing to lend him the money.

Questions

1. What two things have influenced the bank manager's decision not to allow a credit in this case?

2. Why did Mr Ellison want the credit?

3. Was the bank manager sympathetic?

4. Did he offer an alternative, which might help Mr Ellison raise the money?

BARNLEY'S BANK Ltd

Chairman: B. Davenport F.I.D. Directors:B.R.Lewin V.C.D.F.C..C.I.S. A.L. BrodwinA.I.C.A. N. CHARDIS

Telephone: (0222) 825316 Telex: 841132 Fax:(0222)613625 Reg. No: Cardiff 3516614

Head office Queens Building Cathays Park Cardiff CF! 9UJ

Mr P. Ellison Date: 19 November 20—

Ellison & Co. Ltd.

Bridgend Road

Bridgend IF31 3DF

Dear Mr Ellison,

I am sorry to inform you that we will not be able to offer the credit you asked for in your letter of 14 November.

You have had an overdraft in the past year, which partly influenced our decision, but there is also a credit squeeze at present, which has particularly affected loans to the service sector of the economy. I sympathize with you when you say that you have been offered a rare opportunity to expand your business if you can secure the £ 15,000 additional capital. With regard to this, may I suggest that if there are no other possibilities for you to raise the money, perhaps you could approach a Finance Corporation who might be willing to help.

I am sorry that we have to disappoint you in this matter, and hope that we may be of more help in the future.

Yours sincerely,

I. Evans Manager

9.4