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Tostadas Tortilla Chips And Bank Loans Wells Fargo And Salinas Y Salinas Case Solution

Solution Id Length Case Author Case Publisher
1710 611 Words (3 Pages) Gregory B Fairchild and Catharine Carrales Darden School of Business : UV5130
This solution includes: A Word File A Word File

This case discusses the question of loaning to S&S company or not. The issues with this are of the company’s credit worthiness, their physical presence and the uncertainties with the business plan presented to secure the loan. It is recommended that given S&S’s credit history with Wells Fargo and the assets it possesses, a loan mortgaged to its property should be given. 

Following questions are answered in this case study solution

  1. Executive Summary 

  2. Analysis

  3. Recommendations 

Case Analysis for Tostadas Tortilla Chips And Bank Loans Wells Fargo And Salinas Y Salinas

2. Analysis

The Salinas and Salinas (S&S) company was scouting for real estate so that they can expand business. They have now found a suitable location for their enterprise and demand a loan from Wells Fargo to purchase this property. This property would enable them to operate 17 lines of production and would triple their revenues. They would be able to service clients whom they did not currently cater to because the demand for their products exceeded their available supply. The new property was located close to its current operations and S&S would, therefore, keep its current employees. The issue being addressed in the case is that whether a loan should be given to S&S by Wells Fargo or is too risky.  

There were certain issues and challenges in the plan being presented. The first one was of the credit worthiness of S&S. This was because they belonged to a Latino family and showed traits similar to them. Latino families had shown poor credit history and mistrust towards financial institutions. They also were involved in tax avoidance strategies. The S&S company, belonging to a Latino background, possessed these traits. Although their credit history did not have any major defaults, the S&S company was involved in tax avoidance strategies to show low or no income before profits. This led to Wells Fargo in questioning their credit worthiness. They could not get a cash-secured loan as they did not have audited financial statements, net income and other tax issues. This would require one year of consultation to make them worthy of getting a cash-secured loan. 

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