You are a credit officer of Shatin Bank. Today, the directors and owners of xxxx Company Limited, a SME, discussed with you their needs of banking facilities for their claw game (also known as crane game) store business. You got the following key points from the directors:

• The company was established in 2019. The company runs an unstaffed claw game store Doll

  Mall Funny in a new town by renting a shop unit. The startup investment of around $235,000 was partially financed by their parents. Without any track record and real estates as collateral, no banks are willing to provide loans facilities. It borrowed from a finance company with relatively high interest rate at around 10%p.a.

• As the first claw game store in that new town, Doll Mall Funny successfully solicited claw machines tenants, and received promising monthly claw machine rental incomes. The net profit almost pays back the initial investment.

• The company has new financing needs because of several reasons. First, knowing the store was very successful, the shop unit owner asks for higher rent. Second, some claw machines tenants left because they find the income drops with two more similar claw game stores opened around. To increase competitive ability, the company plans to invest more in promotion to attract new machine tenants and players. Third, the directors also want to upgrade the store with newer claw machines. Forth, they want to reduce the financial interest expense by borrowing bank loans to repay the existing loans from finance company.

  Required:

(a) Evaluate the business risks from the lending banks point of view. (b) Suggesttheappropriatechoicesofcreditarrangementandtypesoffinancingaccordingtothe principles of credit structuring and based on the needs of the company.