The Old Van – Line of Credits II

Stepping into his office, reaching to his room door way, his secretary’s voice from his table intercom, requesting him to answer the incoming call, John walked nearer to his table, picking up the receiver before taking his seat. Listening to the caller and getting to know, it was the honorable renovation contractor. John smiled and without saying a word and just only listening, he get himself be seated, adjusting his most comfortable sitting position and sill listening.

Henry the contractor, he was Sam’s friend, it was hearsay, he was one of the best friends. Sam promised him cash before jobs commissioned and cash payment before the next phase of jobs to get started. John was so told over the telephone from the Contractor.  Henry knew it was not the norm of practice so far the renovation/construction industry was concerned. On the other hand, it was a mutual agreement between Sam and him. The price of renovation was way below market price. There were quotation of at least one million RM or above as per he said. Seven hundreds thousands RM  was a deal to exchange for easy payments terms, after all, he said that he used those materials,  the quality if not better it was at par with other competitors.

John “Mr. Henry please, can you hold on for a while and let me say something about the payments we owed it to you?” The caller “Sorry, Mr. John I have to tell you the whole story so that you do understand my position. I am worry, you will be like Sam, lately he refused to take my call, I am far away from your head office and I won’t be able to see him in person now and then” John “Don’t worry, I promise I will take your call, every one of your call” Caller “Sure?” John had to ensure him “Sure, definitely sure, give me one or two hours today and I will call you back” Caller was a bit hesitated “You will call me? Or I call you one hour later” John “Ok; call me back if I fail to call you before lunch”

John had a brief and quick verification of the bank loan application and the documents of the renovation contract. A contract of total value, seven hundred thousand RM, documents indicated five hundred thousand RM of value in jobs completed but only paid two hundred thousand RM. John delay no further, he arranged the office dispatch boy to send over the completed jobs report, the billing of jobs completed and its receipts, the total of two hundred thousand RM.

Danny secretary called up “John I had received your documents and Danny had signed it and I am waiting for another signature” John “When can you get the other signatory?”  Secretary “Most likely next week, anyway today is already Friday and I can’t get it signed today, authorized signatory not around except Danny” John asked “Is Bob in charge of our accounts over the new company?”  The secretary “Yes and I understand your Mr. Sam wanted this account be operated under the central region branch bank and most likely another bank account will be opened in the northern state where the factory situated” John had no comments and The Secretary spoke again “Oh yes John, I nearly forget, please send the director resolutions of approvals for the loan application together with other documents”John on the line with Henry “Mr. Henry, it is next week, we will have fund from the bank loan next week” Henry sounded a little disappointed “Next week? Can it be Monday or Tuesday?” John “Sorry, Mr. Henry, I dare not make an empty promise, I believe, before end of next week should be no problems” Henry “Is it possible to clear the outstanding of RM300.000 plus another RM100,000.” John “Yes, this is another issue I have o discuss with you” Henry listening and John continued “I have to be frank with you since you are good friend of Sam”

John explained the situation to him, he believed, he needed to disclose some facts of the new company otherwise he would have problems with the guy.  John “Mr. Henry as you know this is a new company, we have exhausted all funds and we are getting bank loans to release payment to you.  The bank needed us to provide them your invoice and the receipt you issued to us to the bank. The amount of the receipt, it is the amount of loan they release to us” Henry asked “You mean you could only pay me RM200,000/=” John “Yes, but then, the moment you receive the payment, please do issue the receipt sooner possible and send to me direct and I will arrange another payment” John was not intend to agitated him and silent on the part that he could not receive payment before the jobs was done.  The bank would certainly not to approve the loan. There was a RM200,000/= free for manipulation but reserve for other expenditure to meet.

The package of the total line of credits facility, it was twenty millions RM.  Term loan for renovation or improvement of the factory and the machineries, there were RM700,000/= plus RM1,000,000/= respectively.  Rm300,000/= for working capital which was in the form of Overdraft facility (OD) and RM18,000,000/= for ECR, LC, bill purchases and others.

ECR, the export re-finance facility which was having very low interests and the fund, it was not from private bank finances, it was a subsidized finance from the country central bank.  It was to assist the exporting industries and stimulating the growth of the country economy by exporting force/demands.

It was a first container to roll out from the new factory.  It was so arranged that all higher management personals were present to witness the loading of container to the truck and send to the port for sail.

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The Old Van – Line of Credits I

John was wanted by Sam and David in Sam’s office.  Sam happily announced “John, you will become highly busy from days to come.  We are going to have one more factory in the northern states” Sam continued “It is a big factory and it is in the duty free zone, I am sure we are going to have handsome profits. All directors and shareholders are going to enjoy the fruits of their investments with us, don’t’ you think so, David?”

David shared the happy mood with Sam “Sure, but pass me some of the credits, they are not all yours!” All three of them burst out laughter lightly.

The ‘Duty Free Zone’, it is an area designated at a specific place, fenced up with police, custom enforcement officers’ presence and custom duty facilities established.  It is treated an area of foreign country and all products are for exports. All products are not allowed for domestic sale and supplies.

John asked “What are the products for our new factory?”  Sam responded by passing to David for the clarification and David said “mostly vinyl covers for cars, furniture, kitchen utensils and all home and garden furniture and equipments covers. Patio umbrella and they are more new products out from the raw materials of vinyl sheets in the near future” David paused a few seconds and said again “I am expecting the production for complete products of one 40 footer high cube container per day!” David was excited and most likely he must have some news from his marketing teams overseas.

Forty footer high cube containers, under normal circumstances, there are four combinations of containers for shipments.  Twenty footer and its normal height, the twenty footer means, it is the length of the container which has twenty feet. The high cube, it is to indicate extended height.

John posed a question again “Our new factory ready for production?” Sam answered this time “Not yet, it will be after three months, we bought a defunct factory, it was used as a warehouse by the former owner.  Renovation will be completed after two months and the machineries will be arrived next month, testing of machineries and final torch of renovation shall be ongoing simultaneously?

Sam “The new factory  is under a new company, the memorandum and articles of associations and other associated documents shall be send over to you by the company secretary. David and I together with you, having an appointment with the BAA bank director at their bank head office tomorrow morning” 

BAA bank head office, the director Danny’s room, David and john was introduce to Danny by Sam and Sam had a short small talk with Danny.  The golf playing, who was lost to who, who was needed handicap and yet was lost the game, they were exchanging the views of which golf course was best and the 18 holes field and other number of holes field. These talks were alien to David and John and other subject of small talks was among two of them.

Time was flying and time was right for the serious and the intended business started, Danny talked to John “John, Sam speak very high about you” John responded with a smile. Danny spoke again “John can you prepared 5 years budgeted financial reports for me as well as five years cash flow budget” John answered affirmatively “Ok, how soon you need them?” Danny “As soon as possible, bests not later than two weeks” John “Any others?” Danny “Yes, the usual documents, teams of management, list of directors properties” Sam joined “The part of my directors list of properties, I will give it to you and, John do remind me” David “John you have mine” John “Yes any recent changes? David” He replied “No, the list still valid”

Sam “Danny, what is the status of our credit facilities application” Danny “Practically, it is ok, we are waiting for all the documents” Sam “Can we draw down by next week?’ Danny “You need urgently? Can you wait until all documents are with us?” Sam “I hate the renovation contractor, call me now and then, days and nights nonstop”  Danny “I thought you do have the paid up capitals” Sam “All funds from paid up capitals exhausted for the purchases of the factory and land”

Danny asked his secretary to bring in some documents.  He told Sam that all documents brought in needed his and David’s signature. He also told Sam that the best he could do to assist him to get the bank to release the part of facilities of term loan for the renovation contractor.  However, Sam needed to provide Invoice/bill and paid receipts of the said invoice for each draw down of the amount already paid to the contractor. He reminded Sam, one of the bank conditions, the paid up capital must be twenty percent of the total facilities provided.

Sam office in his room, John was there and Sam’s secretary was taking instructions from Sam. Sam instructed to his secretary “Handing over to John, the entire new factory, the bank loan applications documents, the cheque books, photocopies of land title, and the photocopies of sale and purchase agreement of the factory, the original copies of renovation contractor and original quotations, pro-forma invoices machineries, my updated list of personal properties” He talked to John “I believe that’s about all and the new factory from now on, it is under your care. I will ask the renovation contractor to refer to you with immediate effect!”

John was on the way back to his office, tickling in his brain “Yesterday was in the bank, asking the releasing of credits facilities without all necessary documents were in place, early in the morning of today, handing the ‘whole baby’ to me.  Is the renovation contractors are really so difficult?”


Next Topic: The Old Van – Line of Credits II

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