The promoters of a successful chain of restaurants approach you, the credit officer of a bank pursuing aggressive credit policies, for the following loans. Which of the loans would you consider favourably, and which would you reject? Give reasons for your decisions. What type of loan would you grant in each of the cases you have decided favourably upon? Also provide the risk mitigation measures you would put in place for each type of loan you are considering favourably. (Each situation is to be treated independently).

a. The restaurant wants a working capital loan to finance its inventory predominantly consisting of vegetables, cheese and milk. The inventory may be transferred from the local sourcing headquarters (situated near your bank) to any of the restaurants in the city and suburbs.

b. The restaurant wants to buy new cars for all the promoters.

c. The restaurant wants to invest in the firm supplying cheese and vegetables and seeks bank finance for the investment.

d. The restaurant wants bank finance to pay off the long-term mortgage loan used to buy the premises in which all the restaurants are located.

e. The restaurant wants bank finance to buy new, state-of-the-art cooking equipment for all its restaurants.

f. The restaurant has tied up for venture capital funding for its new posh up market chain and wants interim bank finance till the funding comes through.

g. The restaurant has run into cash flow problems and wants bank finance to pay employee’s salaries.