Page 250 - A Banker Down the Rabbit Hole

71. Discovering why the company

had shortage of working capital

I got a loan proposal for Rs. 5 Crore for providing working capital to

a unit manufacturing Foam Mattresses and Foam Sofa cum Beds
in the Industrial Area. The party told us that they had been dealing
with another bank, State Bank of Patiala and wanted to shift to us
as their bank was not enhancing their credit limits from Rs. 3 crore
as per increased requirements of their growing business.

Based on the actual turnover achieved in last three years, the projections
for the next two years seemed very over-enthusiastic. I decided to check
their past dealings from their earlier bank and went to meet the Branch
Head. He was not available and his deputy simply told the party is okay
and was not so forthcoming about details of the financial standing and
the dealings of the party. On asking if they would give NOC for shifting
the account to our bank, he readily agreed.

I then followed it up by writing formally for a 'Credit Report' on this
customer from the earlier bank. The report was received that just
mentioned "The conduct of the account had been satisfactory. The
company has moderate means." There was nothing negative in the
report but it was not strongly positive too.

I made a factory site visit. I found that moment I arrived there, a truck
also arrived and they started loading some mattresses as if the production
stock was being shipped. Inside the factory, the floor looked as if there
had been no activity on the machines for months together looking to
the dust settled on all machine parts, on other equipment and the floor.
They told that due to paucity of funds, they were not able to produce
up to the full installed capacity and production is curtailed.

Then I had a round of the entire area of the factory. I found a very large

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