Study on Lease
Case study ULC operates different types of lease in Bangladesh. In our report, we focus on purchase order type of lease conducted by ULC. Generally there are three party involved in a purchase order lease.
They are- •The leasing company •The borrower •Vendor In our report, these parties are- •United leasing company •Apollo Hospital Ltd •Siemens Therefore, here Apollo hospital ltd is the borrower and siemens is the vendor. Now we will discuss the steps of the process of purchase order lease financing according to the followed case. 1. Quotation from Apollo hospital ltd:
Apollo hospital as the biggest hospital in our country, which always gives the assurance of providing the best service to the patient, wanted to accommodate with some powerful generators that problem can be created from load shedding. However, buying those is so much expensive and the prudent financing manager decided to make the best use of their fund.
With this view to fulfill their need by the best method they sent the quotation to the united lease company with all the information such as product name, price and product specifications etc. ere the quotation is given below: Product name5 Siemens European diesel generator Product price1,25,00,000 taka Product specifications1000 KVA prime Apollo sent this quotation to the ULC on 11th March,2006 written in their letterhead pad where the name of the hospital was must to mention. 2. Acceptance from Apollo hospital ltd; After the quotation had reached the ULC, then the management found that it has the capacity to provide lease of the generators according to the quotation. So ULC accepted the quotation and agreed to provide lease to Apollo.
3. Loan, lease book:
ULC keeps all the necessary information about the borrower in their lease book. In this case, the information collected about the apollo hospital ltd in the lease book are given below. Borrower name: Apollo hospital ltd Address: Basundhara, Baridhara-1229. Proprietor name: nature of the business: hospital service Financial facility with other institutions: expenditure and revenue break up: 4. visit apollo hospital ltd: In ULC it is mandatory to visit each and every client who has sent quotation to them before providing lease.
They do so to judge the information the client provided, are true or not. In our case before providing the lease of the demanded generators to the apollo hospital ltd a team of officers dealed with case, on 21st March,2006 also visited the hospital and made conversation with the management to know about their need, demand and installment repayment capacity etc.. The team also described to them orally about the terms and conditions of lease usually maintained in ULC. After visiting apollo hospital, ULC found that everything was satisfactory and apollo agreed with the terms and conditions of lease.
So, then they went for complishing the next step.
5. Visit made by credit officers: After complishing, the visit by junior officers and getting satisfactory result, now the time comes for the credit officers to visit the client. The credit oficers visit the cleint to check the credit rating system whether the financial position of the client is enough strong and stable or has any possibility to decline in the near future, whether the business of the client is enough profitable, whether it has capacity to lease installment repayment, whether it has any other finandial obligation.
In our case, we find that after visiting the apollo hospital on 25 March the credit officer also provided satisfactory result. He expressed that, apollo has good financial position in the market and people are satisfied with their hospital services. Apollo was capable for lease repayment as their business was gradually growing.
6. Appraise status: In this step, the leasing company takes decision whether to provide lease financing to the client or disqualify him. Here the leasing company judge client status. It calls Credit Information Bureau of Bangladesh Bank to know about client credit information.
This is a confidential part of leasing process, which should not be known by the client. If, credit information bureau says about the client, NIL- that means the client has taken no loan STD- The client loan position is standard.
That means it has repaided all the loan within the specified period. STD subsidiary- the client loan position is standard subsidiary. That means he has not repaid the loan within the specifie time and it is 6 months overdue. In our case, ULC also called credit information bureau of Bangladesh Bank got the information that apollo was in the standard position.
That meant it repaid all the loan within the time. So, after considering all the necessary matters ULC decided to lease the demanded generators to the apollo hospital ltd and made appraisal report including all the information.
7. Circulation of appraisal report for online apprval: In this step, it is mandatory to mail the appraisal report to the senior officers for online approval as they have the valued experience for judgement. In our case, we see that, ULC also mailed the appraisal report of Apollo Hospital ltd to the senior, experienced officers, managing director for online approval.
They also provided positive impression on the appraisal report and the client. 8. Legal document preparation and signing: Legal documents must be prepared by the operation division and signed by credit division.
This step was properly done by ULC. 9. Asset procurement document submitted by ULC: ULC provides lease for equipment and machineries except for car. It conducts only with the financial lease, not with operating lease. In this step, the lease financing company must issue purchase order to the vendor and collect the documents from him.