Case study 3 - Resubmission of application

Some banks has a policy that says an application which has been rejected within certain time frame is not allowed to re-submit its new application again.

My client recently submitted its fresh application to a bank which has rejected his application about 6 months ago for some non-compliance issues. Thinking that the company had rectified all those non-compliance issues and re-submit its application, the borrower was told that the bank is unable to accept its fresh application for its previous unsuccessful record.

My advice, do not submit your full documents to a bank for official application. Discuss with the bank officer if you have any special requests which may trigger any of the non-compliance issues. For eg. one of the director not able to stand as a guarantor or you want a very high proportion of overdraft facility. Remember, these requests are not to banks' favour.

If you put in an official application with these special requests, very likely your application will be rejected and leave a record in the bank system that your application has been "REJECTED".

Case study 2 - Sudden increase in turnover

Lets examine the following reported turnover of my client :

F/Y 2008 - RM 13 mil.
F/Y 2007 - RM 10 mil.
F/Y 2006 - RM 9 mil.

In my experience, it shouldn't be too much of problem if this client wants to apply for additional facility based on the F/Y 2008 increased turnover.

However, after examining the last 12 months bank statements, I noticed that the average monthly deposit is only RM800k+, meaning the turnover for F/Y 2009 is anticipated to come down to its previous years' average of RM10 mil. On further questioning on the F/Y 2008 result, the client admitted that there was 2 ad-hoc transactions during the financial year which had pushed up the turnover and such transactions are not foreseen to be recurring in future, meaning these were just one-time transactions.

In this scenario, bank will only evaluate the working capital requirement of the company base on the projected turnover of F/Y 2009 and not F/Y 2008.

Case study 1 - Update your audit account

Bank normally has a guideline on the period from the date of last audit to the date of submission where the financial result of this period is unaudited.

Lets take a look at the following scenario of my client :

Latest available audited account - 31 May 2007
Submission date - 16 Oct 2009

The unaudited period from Jun 07 to Oct 09 is 29 months which is far above the guideline of 18 months. Hence banks are not able to accept the application. However, certain bank can accept 24 months.

The company can still submit its application provided the 31 May 2008 audit can be audited before end of Nov 09 so that the unaudited period is 17 months (Jun 08 to Nov 09).

I advised this client not to submit any application until he has completed his 31 May 2009 audit.