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Section 1: Case study A — Ray Murdoch and Steve Brown— Commercial Equipment Finance 

Note: You only need to complete Section 1 or Section 2 tasks 1–4 in this assignment, plus Section 3 task 5. 

Some commerciallenders will not provide interest rate quotes on some commercial products.Often  commercial lenders add a risk weighted margin to a base lending rate for certain commercial products. Without conducting an analysis and risk score, they tend to be reluctant to provide quoted interest rates over the phone. For the purposes of the case studies, conduct online research to ascertain approximate interest rates, loan terms available, fees and charges that usually align to the types of products that would be required to execute the client’s transaction. You are allowed to use estimates. 



You have just met with Ray Murdoch and Steve Brown, referred to you by another commercial client. 


Ray Murdoch and Steve Brown jointly own a successful and growing business that manufactures metal pallets. They trade under the name Pallets-R-Us Pty Ltd. The pallets are manufactured using material that is  lightweight and durable. There has also been a very structured approach to the research and development for the engineering and design of the pallets. The pallets are used in all industry sectors. Part  of the process involves powder coating the finished product, which is currently outsourced to a local well-established contractor. 


It is critical that Ray and Steve’s product meets market needs. They need to maintain sustainable production and operating costs if they are to meet their forecast sales and cost of sales. 


They have a well-established client base that provides them with repeat ‘business-to-business’ dealings. They have been trading for five years andhave a solid business plan with written supply contracts with three major business clients and several smaller business clients. 

Ray and Steve now require finance to assist them with the purchase of a sophisticated machine that uses the technical platform system CNC. This machine can be programmed to rapidly fabricate multiple components. The machine has an expected commercial lifespan of at least 15 years with the operating software to be updated every three years. The software and upgrades are included in the purchase price of $800,000 inclusive of GST.The client has sufficient funds to cover the cost of the installation of the machine.The clients are considering an asset lease to finance the machine.Theyhave asked if it is possible to have the asset lease facility for a seven-year term with a residual of 15%. 

Steve and Ray have provided the last two years financial statements for the trading business. 


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