Small Business Lending and Bank Management issues are set to ease in the coming months....
Wednesday, August 25, 2010
Small Business Lending and Bank Management issues are set to ease in the coming months....
Michael Pascoe | Banks loosen the vault hinges | Business lending
Like minded thinking that banks will start to lend to business again....
Tuesday, August 24, 2010
Business lending the key to future bank success
Westpac again raised the prospect of difficult times ahead regarding profit, as recounted in the following article by Glenn Dyer. However it needn't be that hard if banks started lending to quality businesses again.
Gail Kelly recounted that business lending demand is weak, however this is not my experience. Most businesses out there would change banks in a flash and many have grand plans for growth. The thing that stands in the way is bank appetite, not propensity to borrow.
Wednesday, August 18, 2010
Debt Collection made easy
I recently had a customer hold out on paying me as they were going through a tight spell with cash. This happens, especially in my game, and given my aim is to help clients out of these tight spots the last thing they need is me causing more problems. However this client stopped returning calls, stopped communicating and went under ground. Not on!
After 6 months of chasing, I finally had enough and wrote the client a letter. In the letter I undertook to do 2 things if they didn't make payment within 1 week of the letter date:
1) I would brief solicitors to commence legal proceedings
2) I would lodge a default with the credit bureau, Veda Advantage
After another week of silence I lodged the default. Well, within a couple of days this started working for me. The client was seeking some equipment finance for a new car, and moving offices and both of these processes ground to a hault, as the parties that my client were dealing with used the credit bureau to assess credit. Basically my client could not move until he resolved the difference with me. Brilliant!
To lodge a default you need to be a member of Veda Advantage firstly. Then there are a series of lose requirements re the need for a credit contract to be in place, with over a minimum amount being over due for a minimum period. But it was very easy to do.
Management of your debtors is a key process that banks look at when they are assessing your for credit. If you have a robust process, you will also have a healthy debtors ledger, which banks not only love, but in certain instances will also use as security. Next time you have a painful debtor, consider using Veda Advantage as a primary collection tool. It really worked well for me!
After 6 months of chasing, I finally had enough and wrote the client a letter. In the letter I undertook to do 2 things if they didn't make payment within 1 week of the letter date:
1) I would brief solicitors to commence legal proceedings
2) I would lodge a default with the credit bureau, Veda Advantage
After another week of silence I lodged the default. Well, within a couple of days this started working for me. The client was seeking some equipment finance for a new car, and moving offices and both of these processes ground to a hault, as the parties that my client were dealing with used the credit bureau to assess credit. Basically my client could not move until he resolved the difference with me. Brilliant!
To lodge a default you need to be a member of Veda Advantage firstly. Then there are a series of lose requirements re the need for a credit contract to be in place, with over a minimum amount being over due for a minimum period. But it was very easy to do.
Management of your debtors is a key process that banks look at when they are assessing your for credit. If you have a robust process, you will also have a healthy debtors ledger, which banks not only love, but in certain instances will also use as security. Next time you have a painful debtor, consider using Veda Advantage as a primary collection tool. It really worked well for me!
Wednesday, August 11, 2010
Behind the spin, NAB business performance is as bad as the rest
Reading through the AFR this morning I can't help but think that either the NAB spin machine is working hard or, NAB don't really get what is going on.
In Matthew Drummond's article NAB holds its nerve on rates it is implied that NAB is under pressure from Westpac and CBA who are stealing business clients by the truckload. George Liondis then goes on to recount Cameron Clyne in Rivals step up race to topple bank who also implies that they are under assault without naming the culprits.
My observation is that this is not the real story. The reality is that I would be genuinely surprised if Westpac had written a new to bank deal in nearly 2 years. CBA would be writing a fair bit but this would be mainly property related transactions. However NAB's biggest problem, and the main reason, I suspect, why business lending is down 1.6% is due to natural attrition of the book, and a credit department that is too timid to approve new deals fast enough to replace it. It is unlikely to be anything to do with an increased interest by competitors.
There is nothing wrong with demand for business credit - I am seeing plenty of businesses every week looking for more. What is wrong is that very few, if any, credit departments are willing to approve new deals. The process for dealing with a bank is slower than in any other time in history potentially. The first bank to wake up to this and to start moving at a decent pace will dramatically increase market share. They don't even need to drop prices. The rest of the market is that asleep that for most business customers just getting a bank that responds quickly to requests would be reason enough to incur the transfer costs and move banks.
Cameron Clyne goes on to observe that banks are doing crazy things with rates in business banking. NAB has always had an inflated opinion of their own worth and the value of their relationships, and other banks, especially CBA, have always been significantly cheaper. This is not new. In spite of this, NAB has grown to hold the largest market share. With a large market share comes a large attrition rate that needs replenishing as every day clients are paying down loans per scheduled principal reductions. If NAB does not write enough new business to replace this their book will reduce, and their income will reduce accordingly. Market share is probably remaining constant as none of the other banks are writing new business either so all are experiencing decline at the same rate.
If NAB Execs want to fix this, speed up your decisioning turnaround and slap your credit departments! It wouldn't be hard to do a lot better than the competition....
In Matthew Drummond's article NAB holds its nerve on rates it is implied that NAB is under pressure from Westpac and CBA who are stealing business clients by the truckload. George Liondis then goes on to recount Cameron Clyne in Rivals step up race to topple bank who also implies that they are under assault without naming the culprits.
My observation is that this is not the real story. The reality is that I would be genuinely surprised if Westpac had written a new to bank deal in nearly 2 years. CBA would be writing a fair bit but this would be mainly property related transactions. However NAB's biggest problem, and the main reason, I suspect, why business lending is down 1.6% is due to natural attrition of the book, and a credit department that is too timid to approve new deals fast enough to replace it. It is unlikely to be anything to do with an increased interest by competitors.
There is nothing wrong with demand for business credit - I am seeing plenty of businesses every week looking for more. What is wrong is that very few, if any, credit departments are willing to approve new deals. The process for dealing with a bank is slower than in any other time in history potentially. The first bank to wake up to this and to start moving at a decent pace will dramatically increase market share. They don't even need to drop prices. The rest of the market is that asleep that for most business customers just getting a bank that responds quickly to requests would be reason enough to incur the transfer costs and move banks.
Cameron Clyne goes on to observe that banks are doing crazy things with rates in business banking. NAB has always had an inflated opinion of their own worth and the value of their relationships, and other banks, especially CBA, have always been significantly cheaper. This is not new. In spite of this, NAB has grown to hold the largest market share. With a large market share comes a large attrition rate that needs replenishing as every day clients are paying down loans per scheduled principal reductions. If NAB does not write enough new business to replace this their book will reduce, and their income will reduce accordingly. Market share is probably remaining constant as none of the other banks are writing new business either so all are experiencing decline at the same rate.
If NAB Execs want to fix this, speed up your decisioning turnaround and slap your credit departments! It wouldn't be hard to do a lot better than the competition....
Tuesday, August 10, 2010
Australian Banking and Finance � NAB 2010 June quarter trading update
Reasonable result from NAB though it would be good to see their Net Interest Margin!
Tuesday, August 3, 2010
Banks currently open for business (Aug 2010)
July was an interesting month with the key observation being that Westpac customers were unusually unhappy. As a general observation I have not had many refinance inquiries from Westpac customers for the last couple of years, however in the last 2 weeks I have had 3.
From what I can glean, Westpac has been changing the rules internally and are opting to chase down 'poor performers' and to remove unused limits - if you are to believe Joseph Healy from NAB they are presumably reducing their capital exposure to business banking to better apply to mortgages! This has resulted in some quite good banking customers calling on our assistance to go back to the bank an try to help the Relationship managers try and talk sense into credit. Very strange behaviour by Westpac!
ANZ has come through with the goods for me in the last couple of days, though it has taken a while to get a proposal out of them. The proposal is not particularly sharply priced, but they have been quite astute with their product selection to not only better fit the client need, but minimise pricing (significantly) without compromising on their margins. The result is a massive saving for the client!
I am also getting some very quick turnaround from Bibby Financial Services, a specialist Debtor Finance provider. They are a pleasure to deal with as they are empowered and hungry to write quality deals. Their responsiveness is great. The pricing can shock clients initially, but often they are supporting businesses that others don't have the appetite for, though they are correct to do so.
I am also working closely with 2 other non bank financial institutions at present, being Octet and Coface. Both are proving challenging to gain credit approval but both have a good product and are worth pursuing.
From what I can glean, Westpac has been changing the rules internally and are opting to chase down 'poor performers' and to remove unused limits - if you are to believe Joseph Healy from NAB they are presumably reducing their capital exposure to business banking to better apply to mortgages! This has resulted in some quite good banking customers calling on our assistance to go back to the bank an try to help the Relationship managers try and talk sense into credit. Very strange behaviour by Westpac!
ANZ has come through with the goods for me in the last couple of days, though it has taken a while to get a proposal out of them. The proposal is not particularly sharply priced, but they have been quite astute with their product selection to not only better fit the client need, but minimise pricing (significantly) without compromising on their margins. The result is a massive saving for the client!
I am also getting some very quick turnaround from Bibby Financial Services, a specialist Debtor Finance provider. They are a pleasure to deal with as they are empowered and hungry to write quality deals. Their responsiveness is great. The pricing can shock clients initially, but often they are supporting businesses that others don't have the appetite for, though they are correct to do so.
I am also working closely with 2 other non bank financial institutions at present, being Octet and Coface. Both are proving challenging to gain credit approval but both have a good product and are worth pursuing.
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