Business English / Деловой английский язык |
Setting up a business
SITUATION
Hans Gast wants to set up his own road haulage business, based in Cardiff. He draws up a business plan and approaches his bank for start-up funding. Later, business is going well, and he and his partner, Andreas Tsoulas, decide that the time is right to expand - but first they have to persuade the bank to lend them the additional funding.
CHARACTERS
| Hans Gast | is studying business in South Wales. He is German. |
| Richard Price | is a bank manager. He is Welsh. |
| Andreas Tsoulas | is a businessman. He is Greek. |
LANGUAGE
| Vocabulary | Small businesses; start-up finance; banking services; business expansion. |
| Skills | Presenting and discussing a business plan; looking for a way round a problem; reacting to a proposal or announcement. |
| Documents | A business plan; a letter. |
Presenting a business plan
19.1 Listen and read
Hans Gast is studying business in South Wales. He telephones his bank manager, Richard Price. Listen to what they say. What does Hans want to do?
| HANS | Good morning - is that the manager? |
| RICHARD | Speaking. |
| HANS | Hello. My name is Gast, Hans Gast. I'm from Germany, but I am living in Cardiff and I'm a customer of your bank. Why I'm calling, I've been taking a business course at Cardiff Polytechnic, and I would like to set up a small business of my own here in South Wales. |
| RICHARD | Oh yes. And what sort of business do you have in mind? |
| HANS | Well, I'd like to tell you about it personally, if I can come and see you. |
| RICHARD | Of course. You're most welcome to come in here and have a talk, Mr ... Gast did you say? |
| HANS | Yes, Gast, that's right. |
| RICHARD | Do you have a business plan? It can save a lot of time if... |
| HANS | A business plan? Of course, I have already prepared one. |
| RICHARD | Splendid. Let me have a look in my diary. How about Monday morning, the seventeenth, at ten o'clock? |
| HANS | Yes, ten o'clock Monday morning will suit me fine. |
| RICHARD | I look forward to seeing you then, Mr Gast. Goodbye. |
19.2 Writing practice: preparing for the meeting
Before Hans Gast arrives, Richard Price spends some time preparing a list of what he will need to ask Hans. Start the list for him. You will be able to add to it in 19.5.
19.3 Document study
This is the business plan that Hans prepared. If you were preparing an advertisement for Hans to put in specialist food distributors' magazines, which points would you use to describe his transport service?
BUSINESS PLAN
I wish to set up a refrigerated road transport business, with myself as sole proprietor. 
Initially, I shall have one truck with a load capacity of 1.5 tonnes. It will be fitted with a mobile phone. I shall undertake deliveries for chilled food distributors , offering them a service on which they know they can rely at short notice and in case of emergency. I have made preliminary enquiries with a number of firms, which I contacted while following a marketing course at Cardiff Polytechnic. Their response was very favourable.
I shall drive the truck myself and also employ part-time drivers. My fiancée will help me with administration, bookkeeping and telephone enquiries. Her parents have offered us the use of a room in their house as an office, until we can find a small office to rent.
To finance this venture, I have £10,000 capital. My start-up costs will total £25,000. I am therefore seeking a bank loan of £15,000. I can offer the truck (estimated value £20,000) as security.
I have prepared a detailed cash-flow forecast for the first year of operation, and this shows that the break-even point is reached after twenty-two months. This assumes a bank loan of £15,000 over five years at an annual percentage rate of 18.5%, with interest-only repayments during the first six months.
19.4 Listen and read
Hans is in Richard's office at the bank, discussing his plan. Listen to what they say. Who seems to be more concerned with expanding the business?
| RICHARD | Well, Mr Gast, it's an interesting idea, everything's very nicely presented, and you've obviously done your homework. Though some of your figures are perhaps a little on the optimistic side. And you appreciate the bank will need some kind of security for the loan? |
| HANS | Naturally. But the only fixed asset I can offer you that's of any real value is the truck. |
| RICHARD | Yes, I thought you might say that. Loans can be secured on motor vehicles. |
| HANS | I've found a dealer who will sell me a brand-new one-and-a-half-tonne refrigerated truck for twenty thousand pounds. I think that ought to be acceptable as security for a fifteen-thousand- pound loan. |
| RICHARD | Hm. Do you see this road haulage business of yours starting to pay its way in a couple of years? |
| HANS | Well - if we just stay with one truck, yes. |
| RICHARD | Ah! So you might he looking to expand in a year or two. If you're going to come back then to borrow more money, then obviously... |
| HANS | To be honest, Mr Price, I want to see how the first year goes before I commit myself - and I'm sure the bank feels the same way. |
| RICHARD | I see. Well, I'm happy to approve your application for a loan of fifteen thousand pounds, to be repaid over five years. You'll receive a letter of confirmation and a formal offer from the bank in a few days' time. Repayments will be monthly, by direct debit. But remember, our service doesn't stop there. You have twelve months' free banking - no bank charges - provided you stay in the black, and the turnover on your account doesn't exceed a hundred thousand pounds in the year. And when you are ready to make your next move, you let me know. |
19.5 Writing practice: following up the meeting
Richard Price can now complete his list from 19.2, and write short notes under each heading. Write the list and notes for him.
19.6 Find the word
This is the letter that Richard Price sent to Hans. Read through it, and write a word from the box to fill each of the gaps.
| amount | confirm | debit | period | small | terms |
| charges | credit | interest | repayable | sum | turnover |
Dear Mr Gast
APPLICATION FOR a BUSINESS LOAN
Following our meeting on 17 October, I am glad to be able to b the Bank’s offer of a Small Business Loan on the terms set out below.
c of loan: £15,000 d of loan: five years from 1 November 1992 Rate of e : 18.5% Special f : interest-only payments for first six months Monthly payments: £231.25 until 1 May 1993 Thereafter £509.03 until 1 November 1997.
The enclosed leaflet gives details of some of the Bank’s services to new businesses. No bank g will be made during the first year of operation, provided h does not exceed £100,000 and the account remain in i .
If you will kindly check, complete and sign the acceptance form enclosed, we will arrange for the j of money shown above to be transferred to your account on 1 November. The loan will be k monthly over five years by direct l . On behalf of the Bank, I should like to wish you every success in your enterprise.
Yours sincerelyPlanning for growth
19.7 Listen and read
It is now a year later, and Hans meets Richard Price again. Listen to what they say. How does Hans want to finance the new company?
| HANS | Richard, I'd like to introduce a friend of mine - Andreas Tsoulas. Andreas, this is Richard Price. |
| ANDREAS | How do you do, Mr Price. Hans and I were students together at Cardiff Polytechnic. |
| RICHARD | How do you do. So, I understand from what Hans has been telling me that both of you think it's time to expand the business and set up a limited company? |
| HANS | That's right. We want to transport chilled foods between the UK and Greece, via Germany. Eventually, of course, the network will extend much further. But to run a scheduled service between London and Athens, we need two 30-tonners. |
| RICHARD | Mhm. So you propose to put in twenty thousand pounds each as shareholders? |
| HANS | As we show in our business plan, the authorised share capital will be fifty thousand pounds, and the issued share capital will be forty thousand. |
| RICHARD | Mm. And on that basis you want the bank to lend you two hundred thousand? |
| ANDREAS | I should explain perhaps that my family owns a road-haulage business in Greece. My uncle died last year, and I've been asked to take it over. |
19.8 Writing practice: making notes
Richard Price needs to make notes on Hans and Andreas's new proposal. Start the notes for him. You can add to your list after you have read 19.9.
19.9 Listen and read
The meeting continues. Listen to what they say. What do Hans and Andreas offer as security for the loan?
| RICHARD | Hans, this is certainly quite a different ball game from what you've been in so far. |
| HANS | Yes, but we're confident we can make it work. And my wife is going to be articled to an accountant in Cardiff next year - eventually she will be our Financial Director. |
| RICHARD | Is she going to be a shareholder? |
| HANS | Yes, she can be a shareholder right away. In fact, she owns the house we are living in. We can offer that as our security for half the loan. |
| ANDREAS | Mr Price, the business in Greece has been valued at the equivalent of half a million pounds. That includes stock, goodwill, everything. |
| RICHARD | So although your company will be highly geared , you do seem to have acceptable security - provided the bank can take a charge over the assets in Greece. However, two hundred thousand is outside my limit as a branch manager. All I can do is to pass on your application to regional head office, with a recommendation.
They'll want to see the numbers, so I hope you've got some good ones. |
19.10 Reading for key words
Find the words or phrases in 19.7 and 19.9 that tell you the following:
| 1 | Hans has already given Richard some information about what he and Andreas are planning. |
| 2 | Their trucks will run to a regular timetable. |
| 3 | Andreas is anxious that Richard may reject their proposal without even hearing about the Greek assets. |
| 4 | Richard did not expect Hans and Andreas to need so much money. |
| 5 | Richard thinks that Hans and Andreas will be relying rather heavily on borrowed capital. |
19.11 Speaking practice: challenging a proposal
Listen to this conversation between a bank manager and a customer. Then listen again and speak the part of the bank manager.
| CUSTOMER | I've just bought this lovely old farmhouse in Tuscany. What I propose to do is to open a country hotel. |
| MANAGER | Mm. To be honest, I haven't much experience of the hotel business. Have you? |
| CUSTOMER | Well, not very much, but I believe I can make it work. |
| MANAGER | I see. Let's try and assess its potential. How many bedrooms has it got? |
| CUSTOMER | At the moment there are no bedrooms at all. I should explain that it needs complete renovation. |
| MANAGER | I see. And how much money are you able to put into this? |
| CUSTOMER | Not very much really. I was hoping the bank would be prepared to lend me the full amount. |
| MANAGER | And when do you see the hotel starting to generate some income, so that you could repay the loan? |
| CUSTOMER | I would think in about two or three years. |
| MANAGER | And have you anything to offer as security in the meantime? |
| CUSTOMER | Only the house itself, I'm afraid. |
| MANAGER | I'd be interested to see the figures, but I'm not sure you've really thought this thing through. |
19.12 Find the word
Read the text below about Hans and Andreas's business plans. Write a word from the box to fill each of the gaps.
| charge | family | geared | limited | security | valued |
| expand | finance | goodwill | raise | share |
Hans's transport business has done well in its first year and he wants to a it. His friend, Andreas, has been asked to take over the b firm in Greece, which is c (if we include stock and d ) at about £500,000. The two men plan to set up a e company, which will be independent of the Greek company. They want to f nearly £250,000 altogether, and the bank manager is not sure that they can g such a large sum. Their h capital will amount to only £40,000. Andreas proposes his Greek assets as i for a loan; but it is not always easy for a bank to take a j over property in another country, even within the EC, and the other Greek shareholders may object. The loan would make the company highly k - that is, the ratio of loan capital to share capital would be high - and head office may find this unacceptable.
Raising capital
19.13 Listen and read
Richard Price is meeting Hans and Andreas to tell them of the bank's decision. Listen to what they say. Why has the bank refused the loan?
| RICHARD | Briefly, gentlemen, the word from head office is that they have studied your proposals with great interest, but they feel you have not yet tried hard enough to exploit other sources of finance. |
| ANDREAS | Other sources of finance? |
| RICHARD | Well, this is a Development Area. I think they mean government grants. |
| HANS | How can they say we're not taking advantage of government help? We located our business in South Wales because of tax holidays , low business rates ... |
| ANDREAS | I'm really surprised at the attitude of your head office, because they must know that we would only qualify for a very small grant. We're not creating many new jobs, we're not doing anything for the inner city ... |
| RICHARD | How about the European Regional Development Fund? |
| HANS | We want two hundred thousand, not two million! |
| RICHARD | Of course. Let me try regional head office again. |
19.14 Listen and read
Hans and Andreas have another meeting with Richard Price. Listen to what they say. How do Hans and Andreas 'persuade' Richard to try again?
| RICHARD | Do you have to be so dependent on external finance? Can't you finance part of your expansion internally? |
| HANS | My business is showing a good profit, but I haven't had time to build up any reserves... |
| RICHARD | No, no, no, I was thinking of Mr Tsoulas. You said the family business was worth half a million. Can't you get any more out of it? Sell some property? Move some of your assets over here as collateral? Why not get some members of your family in as shareholders? |
| HANS | I'm afraid that would not be acceptable. We agreed on equal representation of German and Greek shareholders. |
| ANDREAS | Hans, I know how we can do it. We'll put in for an EC grant, and ask the bank for a short-term loan till it comes through. |
| RICHARD | Well, I can try, but... |
| HANS | He means a loan from a Greek bank. |
| RICHARD | Oh! Well, I'm sure we can fix it for you. I'll put it up to region again, but we must repackage it somehow. Suppose some of your trucks, which at the moment are registered in Greece, could be re-registered in the UK? That might persuade them. |
19.15 Find the word: financing a growing business
Read the text below about expanding a business. Write a word from the box to fill each of the gaps.
| assets | create | development | exploit | grants | loans |
| rates | collateral | finance | holidays | qualify | reserves |
When an established company needs to a further expansion, it can often b its own internal resources. One way to do this is to use profit from previous years as capital; but Hans has not had time to build up any c . Another way is to sell off some of the firm's d for cash. Companies sometimes sell their own factories or offices and then lease them back from the buyer. If the company uses its assets as e for a bank loan, the bank will normally take a charge over the property.
New businesses, on the other hand, can often get government f , particularly if they are located in g areas. They may h for grants, or they may be eligible for tax i , low-interest j or low business k for a fixed number of years, or assistance with finding and training staff. In return, the company will l new jobs.
19.16 Reading for key words
Find the words or phrases in 19.13 and 19.14 that tell you the following:
| 1 | Find other ways of getting the money. |
| 2 | Richard partly agrees with head office that they should apply for a grant. |
| 3 | Hans is worried that the business he started may be taken over by Andreas's family. |
| 4 | Richard is not very optimistic about the idea of a short-term loan. |
| 5 | Richard suddenly becomes more co-operative. |
| 6 | We have to present the application in a different way. |
19.17 Writing practice: making notes
Hans and Andreas must now make notes of what they have to do. Re-read the dialogues on this page and write the notes for them.