I've had it confirmed from multiple sources that banks are currently not interested in taking on new business where the operator is running split banking relationships.
The banks are seeing examples where clients are getting into trouble, due to circumstances beyond the boundaries of their relationships, and then surprising the bank with the problem. Now wise to this banks are wanting to have control of the client relationship and to have a full picture of all the assets and liabilities, in order to allow them to sufficiently protect their positions.
The trick now for business people is to go against everything they have learned historically and be willing to give the full picture to a prospective lender. Only then, with an ability and comfort that all the risks present in an application are highlighted, will a bank be willing to make a decision to support a new business relationship.
We have a template to assist businesses in pulling together this story if the prospect is too daunting. Let me know and I can send it through....
Thursday, November 20, 2008
Thursday, October 9, 2008
What banks see in your business that you don't
As a commercial finance advisor I see a lot of great businesses. I am continually surprised however by how little people know about what a bank looks at when assessing a loan, and why banks don't tell more people about it. The surprise extends when more often than not these great businesses look ordinary as banking propositions.
The major cause of this misunderstanding is that business does not look at cashflow the way a bank looks at it. If more businesses did look at it this way, more directors would sleep better at night and would grow at the rates that the quality of the product/service deserves.
So what is a quick way to tell if the way you manage cash is attractive to banks? You need 2 ratios:
1) The Gross Margin %
2) The Working Capital %
The Gross Margin % is simply the amount of money left over after you pay your trade suppliers - ie Gross Margin / Revenue x 100. What this percentage shows is how many cents you have left after paying suppliers, for every $1 of revenue. Hence if your Gross Margin % is 38%, then for every $1 of sales you keep $0.38 of gross margin (ie before you pay your operating expenses but after you've paid your COGs.
The Working Capital % shows you how much money you need to run your working capital machine. Working capital is made up of your Debtors, your inventory and your accounts payable/ trade creditors. It is calculated as (Debtors + Inventory - Accounts Payable)/Revenue x 100. What this signifies, in simple terms, is how many cents for every $1 of revenue are used up by your business in the funding of debtors, inventory and creditors.
An alarm bell rings for a bank when Working Capital % is greater than Gross Margin %. Why? Lets go back to the previous example. Gross Margin % is $0.38 for every $1 of sales. If Working Capital % is say 43%, then the business requires $0.43 to fund the business for every $1 of sales. So when $1 is made in sales, the business has $0.38 left after COGs, and yet it still needs $0.43 to fund the business, so from a cash perspective it is using $1.05 when it has only earned $1. And this is before it pays for operating costs.
From this you see that whilst the business might record a profit for tax purposes, for bank prposes it is going backwards, and one day it will just run out of cash. This is one of the first things a bank looks for. To fix it, well that's for another day, but feel free to contact me and I can talk you through it.
The major cause of this misunderstanding is that business does not look at cashflow the way a bank looks at it. If more businesses did look at it this way, more directors would sleep better at night and would grow at the rates that the quality of the product/service deserves.
So what is a quick way to tell if the way you manage cash is attractive to banks? You need 2 ratios:
1) The Gross Margin %
2) The Working Capital %
The Gross Margin % is simply the amount of money left over after you pay your trade suppliers - ie Gross Margin / Revenue x 100. What this percentage shows is how many cents you have left after paying suppliers, for every $1 of revenue. Hence if your Gross Margin % is 38%, then for every $1 of sales you keep $0.38 of gross margin (ie before you pay your operating expenses but after you've paid your COGs.
The Working Capital % shows you how much money you need to run your working capital machine. Working capital is made up of your Debtors, your inventory and your accounts payable/ trade creditors. It is calculated as (Debtors + Inventory - Accounts Payable)/Revenue x 100. What this signifies, in simple terms, is how many cents for every $1 of revenue are used up by your business in the funding of debtors, inventory and creditors.
An alarm bell rings for a bank when Working Capital % is greater than Gross Margin %. Why? Lets go back to the previous example. Gross Margin % is $0.38 for every $1 of sales. If Working Capital % is say 43%, then the business requires $0.43 to fund the business for every $1 of sales. So when $1 is made in sales, the business has $0.38 left after COGs, and yet it still needs $0.43 to fund the business, so from a cash perspective it is using $1.05 when it has only earned $1. And this is before it pays for operating costs.
From this you see that whilst the business might record a profit for tax purposes, for bank prposes it is going backwards, and one day it will just run out of cash. This is one of the first things a bank looks for. To fix it, well that's for another day, but feel free to contact me and I can talk you through it.
Monday, September 22, 2008
Where to go when the bank says no....
Even the strongest businesses are finding accessing credit through a bank difficult in the current environment. Below are some ideas that may assist businesses to continue the hunt when their bank won't come to the party;
1) Employ an expert
When applying for equity finance businesses will invariably incur cost seeking the input of experts to ensure that the likelihood of raising funds is maximised. However businesses seldom seek expert assistance when applying for debt finance. Having an experienced banker assist you in putting together your story in a way that is extremely compelling for a bank is valuable, especially in this environment, and will maximise your chance of success. Often these experts will not actually cost you anything as they will be accredited brokers with the recipient banks and will be paid commissions by the banks for your business.
2) Government Grants
There are over 300 grants available to Australian Businesses from the government to encourage businesses growth and prosperity. Speak to an expert (eg Grant Ready) about whether your business is eligible for any of these. These experts might take a percentage of the grant for their assistance, but they will maximise your chance of obtaining one, should there be one that fits you and your business.
3) Debtor/Inventory Finance
Historically when a business needs finance, it goes to the bank and asks for a loan, and this loan is secured by business assets, but backed up by personal security. Without bricks and mortar banks have a limited appetite to lend against business assets (generally deeming this to be an unsecured proposition). However most lenders these days have a debtor finance product where they will lend a business up to 80% of the value of invoices provided to customers, secured for the most part by these invoices. There are intricacies re concentration of debtors and collection performance, but on the whole these are very effective facilities for businesses that are growing fast and enduring large working capital strains due to trading terms with customers. A broker can assist you to determine whether this is a reasonable proposition with a financier.
4) Family and Friends
Whilst some might not be positioned to do so, do not undervalue the prospect of seeking assistance from family and friends. This can be a cheap form of finance, though the emotional risk of business failure and the consequences on these relationships needs to be dealt with proactively. Formally documenting such relationships is important, to minimise the risk of misunderstanding and some of the upside to receiving the funds should be considered to avoid jealousies and frustrations that can be natural in such circumstances.
5) Business Angels and Venture Capital
Depending on how important it is to obtain funds, you might wish to consider sharing some of the ownership of the company. These relationships can vary in terms of control of the business required by the investor, and the amount of additional value add that the provider can offer, including broadening your network for sales opportunity, or helping set up alliances that might reduce operating costs. These relationships can be incredibly powerful, and there is still a significant amount of personal wealth available to be tapped in to. Most business advisors would know of avenues to obtain such funding.
6) Personal Funding
Depending on what and how much the business needs, it might be possible to cover the funding gap in the short term using personal financing options. Equity in your home loan can be accessed either by home loans or in some instances reverse mortgages. Credit Cards are also relatively freely available, though an extremely expensive form of finance. The important thing to realise as a business owner offering personal assets is that if the business fails, you will lose these assets. Speaking to your accountant and lawyer can help minimise this risk but unless you are very much in control of the business and its destiny I would be reluctant to volunteer personal assest unless the reward significantly exceeds the risk of the proposition.
It is important to note that banks are still lending money, and whilst down 15percent on preceeding periods, new business loans below $2m still totaled $19.3B at the end of June. Bankers still have sales targets and bonuses that rely on profitable business being written. But the credit departments have a close eye on quality. If obtaining finance is a struggle, talking to an experienced banker is likely to be a good first port of call.
1) Employ an expert
When applying for equity finance businesses will invariably incur cost seeking the input of experts to ensure that the likelihood of raising funds is maximised. However businesses seldom seek expert assistance when applying for debt finance. Having an experienced banker assist you in putting together your story in a way that is extremely compelling for a bank is valuable, especially in this environment, and will maximise your chance of success. Often these experts will not actually cost you anything as they will be accredited brokers with the recipient banks and will be paid commissions by the banks for your business.
2) Government Grants
There are over 300 grants available to Australian Businesses from the government to encourage businesses growth and prosperity. Speak to an expert (eg Grant Ready) about whether your business is eligible for any of these. These experts might take a percentage of the grant for their assistance, but they will maximise your chance of obtaining one, should there be one that fits you and your business.
3) Debtor/Inventory Finance
Historically when a business needs finance, it goes to the bank and asks for a loan, and this loan is secured by business assets, but backed up by personal security. Without bricks and mortar banks have a limited appetite to lend against business assets (generally deeming this to be an unsecured proposition). However most lenders these days have a debtor finance product where they will lend a business up to 80% of the value of invoices provided to customers, secured for the most part by these invoices. There are intricacies re concentration of debtors and collection performance, but on the whole these are very effective facilities for businesses that are growing fast and enduring large working capital strains due to trading terms with customers. A broker can assist you to determine whether this is a reasonable proposition with a financier.
4) Family and Friends
Whilst some might not be positioned to do so, do not undervalue the prospect of seeking assistance from family and friends. This can be a cheap form of finance, though the emotional risk of business failure and the consequences on these relationships needs to be dealt with proactively. Formally documenting such relationships is important, to minimise the risk of misunderstanding and some of the upside to receiving the funds should be considered to avoid jealousies and frustrations that can be natural in such circumstances.
5) Business Angels and Venture Capital
Depending on how important it is to obtain funds, you might wish to consider sharing some of the ownership of the company. These relationships can vary in terms of control of the business required by the investor, and the amount of additional value add that the provider can offer, including broadening your network for sales opportunity, or helping set up alliances that might reduce operating costs. These relationships can be incredibly powerful, and there is still a significant amount of personal wealth available to be tapped in to. Most business advisors would know of avenues to obtain such funding.
6) Personal Funding
Depending on what and how much the business needs, it might be possible to cover the funding gap in the short term using personal financing options. Equity in your home loan can be accessed either by home loans or in some instances reverse mortgages. Credit Cards are also relatively freely available, though an extremely expensive form of finance. The important thing to realise as a business owner offering personal assets is that if the business fails, you will lose these assets. Speaking to your accountant and lawyer can help minimise this risk but unless you are very much in control of the business and its destiny I would be reluctant to volunteer personal assest unless the reward significantly exceeds the risk of the proposition.
It is important to note that banks are still lending money, and whilst down 15percent on preceeding periods, new business loans below $2m still totaled $19.3B at the end of June. Bankers still have sales targets and bonuses that rely on profitable business being written. But the credit departments have a close eye on quality. If obtaining finance is a struggle, talking to an experienced banker is likely to be a good first port of call.
Friday, September 19, 2008
What a week in banking, but has anything changed
Talking last night with insolvency experts, it would seem that the world from their perspective is a dark and dangerous place now. By far the biggest single reason for business failure in their opinion is the global credit crunch/crisis.
There is no doubt that today, when presented with a lending opportunity bankers are thinking much more than twice. They are also becoming less forgiving with businesses where the bank suspects that the future is bleak. In many instances these banks are forcing Investigative Accountant reports upon the clients, as is their right, simply to have the Accountants tell the bank what they already know - this is not a good customer. The same amount that the client pays for the Investigative Accountant could be paid to pay the same Accountant to help guide the business out of the pickle.
Banks however have been more nervous for over 6 months now, and in fact, we are finding that in fact at Business and Corporate banking level, banks have calmed down somewhat. They are still open for new business, and staff are still being remunerated to find new business. However credit departments (who control the cheque book) have gone back to basics and are, for the most part applying sensible and prudent credit process. The deals that they have stopped doing, are the deals that they should probably an hot done in the first place!
However one thing we are noticing is that it pays to have a banker help you prepare your submission. Addressing all the negative aspects of your business shows that you are in control and that you know there are negatives. A customer that does this (assuming the underlying foundations of the business are sound) is attractive because it shows that they know their business, they are strategic in their ability to identify and deal with weakness, and they are honest and up front - in other words less likely to surprise the bank.
There is no doubt that today, when presented with a lending opportunity bankers are thinking much more than twice. They are also becoming less forgiving with businesses where the bank suspects that the future is bleak. In many instances these banks are forcing Investigative Accountant reports upon the clients, as is their right, simply to have the Accountants tell the bank what they already know - this is not a good customer. The same amount that the client pays for the Investigative Accountant could be paid to pay the same Accountant to help guide the business out of the pickle.
Banks however have been more nervous for over 6 months now, and in fact, we are finding that in fact at Business and Corporate banking level, banks have calmed down somewhat. They are still open for new business, and staff are still being remunerated to find new business. However credit departments (who control the cheque book) have gone back to basics and are, for the most part applying sensible and prudent credit process. The deals that they have stopped doing, are the deals that they should probably an hot done in the first place!
However one thing we are noticing is that it pays to have a banker help you prepare your submission. Addressing all the negative aspects of your business shows that you are in control and that you know there are negatives. A customer that does this (assuming the underlying foundations of the business are sound) is attractive because it shows that they know their business, they are strategic in their ability to identify and deal with weakness, and they are honest and up front - in other words less likely to surprise the bank.
Thursday, September 11, 2008
Wednesday, September 3, 2008
5 things not to do when applying for business finance
Rather than cover some of the "to dos" in banking I thought I'd share a few of the "Not to dos", as there are some not so obvious pitfalls that many businesses fall foul of when applying for credit.
1) Don't let the bank guess anything
Too often business either opts not to tell the whole story or takes for granted that the bank will know parts of the story. But beware, if left to their own devises, banks will always err on the side of conservatism, and will assume the worst. If you have related entities in your balance sheet, a bank will assume they are there to actively hide funds from creditors. If you have growing inventory, the bank will assume that the market has dried up and your stock is worthless. If you have disproportionate growth in Cost of Goods Sold, the bank will assume your trade creditors don't like you and are increasing trade terms. The lesson: Always proactively deal with the negatives in your application and if you don't know what they are, ask an expert.
2) Don't falsify information
Pretty obvious, but regularly ignored. Banks have long memories (there's always someone in the credit department who remembers something that happened years ago), and access to information. Invariably they will find out either before, during or after an application is approved and they will never react favourably once false information is outed (perhaps this is the obvious bit).
3) Don't leave it to the bank to work out your money flows
If you have intra group funds flowing, you need to give comfort to the lender that other group members will not bleed the borrowing entity dry of cash and solvency. Proactively dealing with this involves disclosing who the entities are, what they do, and where possible, what their financial circumstance is. Proactively dealing with this will reduce time and complication of the lending process.
4) Don't present a forecast P & L without a forecast Balance Sheet
Bank analysis tools do not operate properly without a balance sheet. Also, without a balance sheet you are only telling part of the story and you are not demonstrating that you are on top of the financial mechanics of your business. Accountants should be able to assist with construction of forecasts that incorporate these if need be.
5) Don't leave it to the bank to identify their ideal security structure
Banks are not Equity providers, and expect significantly less risk in their "investment". In return for this reduced risk they obviously expect a lesser return. The more risk the bank can mitigate through security (ie directors guarantees, homes, business property, related party assets etc), the greater the risk:return ratio and, at a portfolio level, the more money they make for their shareholders. So, given half a chance they will take all they can, and more often than not they do. However understanding this premise, it is possible to reduce the security provided, as long as you can present an otherwise reduced risk proposition. This may include demonstrating strong servicing capacity. It may require providing some property but not all. The key is to present the security structure to the bank, thereby setting the expectation levels and providing you a point from which to negotiate.
If you would like to talk to an independent commercial finance expert, why not contact Pearl Financial Services? Our Commercial Finance Advisors can assist you in becoming bank ready, optimising the chance of success when applying for commercial finance.
1) Don't let the bank guess anything
Too often business either opts not to tell the whole story or takes for granted that the bank will know parts of the story. But beware, if left to their own devises, banks will always err on the side of conservatism, and will assume the worst. If you have related entities in your balance sheet, a bank will assume they are there to actively hide funds from creditors. If you have growing inventory, the bank will assume that the market has dried up and your stock is worthless. If you have disproportionate growth in Cost of Goods Sold, the bank will assume your trade creditors don't like you and are increasing trade terms. The lesson: Always proactively deal with the negatives in your application and if you don't know what they are, ask an expert.
2) Don't falsify information
Pretty obvious, but regularly ignored. Banks have long memories (there's always someone in the credit department who remembers something that happened years ago), and access to information. Invariably they will find out either before, during or after an application is approved and they will never react favourably once false information is outed (perhaps this is the obvious bit).
3) Don't leave it to the bank to work out your money flows
If you have intra group funds flowing, you need to give comfort to the lender that other group members will not bleed the borrowing entity dry of cash and solvency. Proactively dealing with this involves disclosing who the entities are, what they do, and where possible, what their financial circumstance is. Proactively dealing with this will reduce time and complication of the lending process.
4) Don't present a forecast P & L without a forecast Balance Sheet
Bank analysis tools do not operate properly without a balance sheet. Also, without a balance sheet you are only telling part of the story and you are not demonstrating that you are on top of the financial mechanics of your business. Accountants should be able to assist with construction of forecasts that incorporate these if need be.
5) Don't leave it to the bank to identify their ideal security structure
Banks are not Equity providers, and expect significantly less risk in their "investment". In return for this reduced risk they obviously expect a lesser return. The more risk the bank can mitigate through security (ie directors guarantees, homes, business property, related party assets etc), the greater the risk:return ratio and, at a portfolio level, the more money they make for their shareholders. So, given half a chance they will take all they can, and more often than not they do. However understanding this premise, it is possible to reduce the security provided, as long as you can present an otherwise reduced risk proposition. This may include demonstrating strong servicing capacity. It may require providing some property but not all. The key is to present the security structure to the bank, thereby setting the expectation levels and providing you a point from which to negotiate.
If you would like to talk to an independent commercial finance expert, why not contact Pearl Financial Services? Our Commercial Finance Advisors can assist you in becoming bank ready, optimising the chance of success when applying for commercial finance.
Friday, August 22, 2008
Comprehensive reporting - what's all the hype about?
A long awaited privacy review has finally been released this week by the ALRC, and in it a watered down version of positive credit reporting has been endorsed. As one of only 2 countries in the OECD who currently only provide negative credit reporting, ie when you haven't paid your bills, not when you have, Australian credit risk managers have always done an impressive job given their lack of borrower insight. The US have had comprehensive reporting for a long time and look at the pickle their credit managers have achieved! With the proposed changes, which are odds on to be accepted by the government and legislators, Banks will finally get some deeper insight.
What the banks have asked for and what they have got in the report are not the same thing, and the consumer lobby groups would be pleased, as would the unscrupulous and less financially sound. Ideally (to banks and credit bureaus anyway) the ALRC recommendation would have included the ability for credit histories to contain not only applications for credit (currently included) and defaults in repayment history (generally reported though in practice long after the fact currently), but they would also now store when those applications were accepted and the limit provided (this has been proposed to be included) and current balances (omitted).
Today there are many blind spots in our credit system that allow the credit impaired to still operate and obtain finance under the radar. Banks, though heavily motivated by profit, are also motivated by the "a current affair" factor, and hence are keen to avoid lending to those that might lead them into hot PR water, ie credit cards for dole recipients etc. Consumer Lobby groups have opposed positive reporting seeking to protect the individual from the less scrupulous lenders in the market place who might use the info to prey on the financially impaired with even more vigour than they do today. This, like the argument of regulated gambling, removes the onus of responsibility from the individual wrong doer to the large corporate who is facilitating the ability for the individual to fail - way too involved topic for a Friday afternoon rant! But in the meantime banks are going to still be expected to make sensible lending decisions with one hand tied behind their back, which seems like a bit of a contradictory outcome as far as the consumer groups are concerned - to prevent you marketing to the credit impaired, we'll allow you to not know their impaired. Surely the consumer groups have this around the wrong way?
My humble thoughts are that the credit impaired would be better off if the banks knew that lending to them was wrong (through disclosure of credit position) and then the credit impaired having recourse if the banks pressed on and lent anyway.
Anyway, the point of all this, and my observation, is that business banks don't generally use the information that is available to them today, so providing them with more info not to use is probably futile. Whilst consumer bankers use this information intimately, more often than not credit bureau info is not credit policy for most banks and whilst some still check credit histories of directors, most ignore the credit histories of business. Why? 3 reasons: 1) They get so much other information and have a good trust of their guts (rightly or wrongly), 2) Relatively few banks report poor credit performance because they do not wish to impair a poor clients ability to find finance elsewhere when they tell them that they are not really wanted any more and 3) The cost of automating data updates to credit bureaus, and automating feeds of credit information into lending processes is huge, and banks todate in benign credit envirobnments have not had sufficient business case to make the investment. So unless banks all suddenly chioose to make this investment, they are unlikely to use most of the new info.
have a different opinion - I'd love to hear it!
What the banks have asked for and what they have got in the report are not the same thing, and the consumer lobby groups would be pleased, as would the unscrupulous and less financially sound. Ideally (to banks and credit bureaus anyway) the ALRC recommendation would have included the ability for credit histories to contain not only applications for credit (currently included) and defaults in repayment history (generally reported though in practice long after the fact currently), but they would also now store when those applications were accepted and the limit provided (this has been proposed to be included) and current balances (omitted).
Today there are many blind spots in our credit system that allow the credit impaired to still operate and obtain finance under the radar. Banks, though heavily motivated by profit, are also motivated by the "a current affair" factor, and hence are keen to avoid lending to those that might lead them into hot PR water, ie credit cards for dole recipients etc. Consumer Lobby groups have opposed positive reporting seeking to protect the individual from the less scrupulous lenders in the market place who might use the info to prey on the financially impaired with even more vigour than they do today. This, like the argument of regulated gambling, removes the onus of responsibility from the individual wrong doer to the large corporate who is facilitating the ability for the individual to fail - way too involved topic for a Friday afternoon rant! But in the meantime banks are going to still be expected to make sensible lending decisions with one hand tied behind their back, which seems like a bit of a contradictory outcome as far as the consumer groups are concerned - to prevent you marketing to the credit impaired, we'll allow you to not know their impaired. Surely the consumer groups have this around the wrong way?
My humble thoughts are that the credit impaired would be better off if the banks knew that lending to them was wrong (through disclosure of credit position) and then the credit impaired having recourse if the banks pressed on and lent anyway.
Anyway, the point of all this, and my observation, is that business banks don't generally use the information that is available to them today, so providing them with more info not to use is probably futile. Whilst consumer bankers use this information intimately, more often than not credit bureau info is not credit policy for most banks and whilst some still check credit histories of directors, most ignore the credit histories of business. Why? 3 reasons: 1) They get so much other information and have a good trust of their guts (rightly or wrongly), 2) Relatively few banks report poor credit performance because they do not wish to impair a poor clients ability to find finance elsewhere when they tell them that they are not really wanted any more and 3) The cost of automating data updates to credit bureaus, and automating feeds of credit information into lending processes is huge, and banks todate in benign credit envirobnments have not had sufficient business case to make the investment. So unless banks all suddenly chioose to make this investment, they are unlikely to use most of the new info.
have a different opinion - I'd love to hear it!
Thursday, August 14, 2008
Banks to increase pricing for existing customers
Under pressure to maintain profitability in an ever weakening credit market, we're hearing that that Major banks here in Australian are currently undertaking reviews of loan pricing for their existing business customers. These reviews are designed to identify businesses where bank revenue returns are not in line with risk profiles, and to ensure that pricing is amended (up) accordingly for these customers.
Whilst such reviews are not a new phenomenon in Banking, some of the new criteria being used to determine risk are, and this will undoubtedly extend the negative sentiment generally held by business towards these large institutions.
An example of these new risk influences is the term of the loan, where long term facilities are expected to draw a new risk rate premium in the new regime. Banks expect the longer the business operates in the current environment, the more likely it is to fail.
This attitude flies in the face of historical understanding relating to credit risk. It has long been understood that the longer a business operates, the less likely it is to fail. It also stands to reason that the longer a loan proceeds, the more is paid off and hence if the business does fail, the losses for the bank are less. This is a significant change if it is true and will impact the price of lending of many businesses. This, combined with the recent observations that bank’s need to incur, and pass on capital costs for lines of credit under Basel 2 [see this business spectator article] suggests that business borrowing costs will only increase.
Excuse the blatant plug but if your bank is putting you through this, then perhaps talking to a commercial finance advisor might help. Having a banker on your side who can help you to prepare your defense against the banks can only improve the outcome and ofrten there is no cost to the service. Give us a call.
Whilst such reviews are not a new phenomenon in Banking, some of the new criteria being used to determine risk are, and this will undoubtedly extend the negative sentiment generally held by business towards these large institutions.
An example of these new risk influences is the term of the loan, where long term facilities are expected to draw a new risk rate premium in the new regime. Banks expect the longer the business operates in the current environment, the more likely it is to fail.
This attitude flies in the face of historical understanding relating to credit risk. It has long been understood that the longer a business operates, the less likely it is to fail. It also stands to reason that the longer a loan proceeds, the more is paid off and hence if the business does fail, the losses for the bank are less. This is a significant change if it is true and will impact the price of lending of many businesses. This, combined with the recent observations that bank’s need to incur, and pass on capital costs for lines of credit under Basel 2 [see this business spectator article] suggests that business borrowing costs will only increase.
Excuse the blatant plug but if your bank is putting you through this, then perhaps talking to a commercial finance advisor might help. Having a banker on your side who can help you to prepare your defense against the banks can only improve the outcome and ofrten there is no cost to the service. Give us a call.
Wednesday, August 13, 2008
My First Blog Blog
I'm starting out on a journey to build a Commercial Finance Advisory business in Australia. What's a commercial finance advisor? We are finance experts, who can offer businesses insights into how banks think. We have worked for banks in the past and we have access to the tools that banks use to make commercial lending decisions. This gives us an ability to help businesses understand what a bank thinks of them before a bank is asked.
My company, Pearl Financial Services Pty Ltd, was actually started by my father 4+ years ago and has written AUD$1.3B in loans (thats nearly USD$1.3b for all my US friends, thanks to near parity in exchange rates!!).
Over the next few months I plan to explore the use of blogging and social media platforms as a tool to raise awareness for our new business. In the meantime if we can help you or friends of yours in dealing with banks for business funding, please give me a shout.
My company, Pearl Financial Services Pty Ltd, was actually started by my father 4+ years ago and has written AUD$1.3B in loans (thats nearly USD$1.3b for all my US friends, thanks to near parity in exchange rates!!).
Over the next few months I plan to explore the use of blogging and social media platforms as a tool to raise awareness for our new business. In the meantime if we can help you or friends of yours in dealing with banks for business funding, please give me a shout.
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