The ASC Blog
2012 Blogs
Bank Bashing Continues – take 2 - From ASC Finance for Business
Posted on 14th May 2012 by Henry Ejdelbaum
The bank bashing season is back in full swing. Every day we read another article about banks not lending to businesses and in particular not lending to small businesses. Every other day we read in an article that whatever loans are available they are offered at extremely restrictive terms and fairly high rates of interest. Yes we can all join in and have another bash and go at banks but ultimately that does not help.
We all know that the government has pumped in £billions into the banking system and that clearly this hasn’t helped. Other solutions are therefore necessary. We have mentioned on a number of occasions that initiatives to further growth and demand in the business community would be more suitable. Simply put. If a business starts investing and another business is selling then that cash flow will multiply through the economy. So the key is to stimulate the economy and to motivate business people and entrepreneurs to look positively at the future. Complicated schemes like the National Loan Guarantee Scheme will not do the trick. The experience with the EFG confirms that. But it is not all doom and gloom because we know from our experience that business finance can be raised. With the right approach and for the right proposal there is sensible finance available.
Henry Ejdelbaum
Posted on 10th May 2012 by Henry Ejdelbaum
This really is a shame because trust used to be such an important ingredient of business relationships. You still have to trust your suppliers to deliver on time, you still have to trust your customers to pay their invoices, you still have to trust your professional advisors that looking after your best interests is really their only motive and of course you have to trust that your bankers and your financial advisers will look after you. It seems that the more that high tech communication is introduced the less that trust and common sense are being applied – just look at the number of forms and disclaimers you have to sign; or look at the voice message that tells you that phone conversations are being recorded!
We still believe that trust is important in the modern business world and I have every confidence that our clients trust us to arrange the right finance.
But there is another point and I would like to say “trust us”. We are seeing signs of growth, we are seeing signs of positive development. Many of our clients have decided to move forward and have identified opportunities. Yes it is still difficult to raise finance (but that’s what we are here for) and yes there is quite a lot of confusing, unreliable noise coming from our politicians. Trust in our expertise, trust in ASC to obtain the right finance for your business! The bank manager concept may have gone but ASC are still here.
Henry Ejdelbaum
£20bn raised by introducing one new tax - Yes - with one condition. - From ASC Finance for Business
Posted on 2nd May 2012 by Henry Ejdelbaum
Should banks be commissioned to begin their own financial recovery via their own pockets?
I felt the need to dedicate one of our blogs to the ‘financial transactions tax’ (FTT). Although there are influential supporters of the tax such as Bill Gates, Bill Nighy and Oxfam there are also a fair few individuals opposed to the tax and quite frankly I feel somewhat indifferent about it.
Yes we all had that pang of bitterness when the banks caused our initial recession in 2008 - let alone having suffered through the difficult period that followed and the bleak financial future we are heading towards, due to the global financial crisis, and therefore I do believe banks should be commissioned to begin their own recovery via their own pockets. With the latest European plan being that from January 2014 securities transactions, involving an EU-based financial institution, would be taxed at 0.1 per cent and all OTC derivatives deals at 0.01 per cent - for that minimal percentage to raise a potential £20bn - great if it will but I can’t help think, are they over estimating the success of this new tax?
On the other hand if you look back to the 1990s when Sweden imposed a Robin Hood Tax of 0.003% on bond transactions it caused a catastrophic effect on the Swedish economy. The question is - are we basing this tax on hope and ignoring the potential disasters on the economy?
With a divide in politics about this tax - they are situated in a tug of war situation - I find myself placed in the middle. But if introducing this tax the government will simultaneously reduce other taxes to stimulate the economy then I am won over and it is worth taking the risk
Henry Ejdelbaum
Bad News for Journalists and Politicians - there is some good news - From ASC Finance for Business
Posted on 26th April 2012 by Henry Ejdelbaum
There is so much negativism in the economy which is amplified by all the stories you hear from politicians and journalists. Nobody disagrees that businesses cannot be run the same way as was possible in 2007. But equally let's not constantly talk about a financial Armageddon.
On the contrary, we have seen increases in business. We are seeing business sectors which are doing well. In other words, there are opportunities around and we see this mirrored by an increase of sensible business. Why do I say sensible? Because if clients have sensible requirements there is sensible finance available. Contrary to what many believe there are some banks in this country that are actually keen to lend.
And just in case you are sceptical let me give you some example of business sectors which are doing well in 2012: Food retailing, web design, hair and beauty, specialist engineering, fashion, advertising (yes advertising!) and architecture.
If you operate a successful and interesting business we would like to hear from you.
Henry Ejdelbaum
Why Low Base Rates are Bad for You - From ASC Finance for Business
Posted on 19th April 2012 by Henry Ejdelbaum
It seems that the economy is run by magicians. On one hand we are told that low base rates are important for the economy. On the other hand I have yet to find somebody who is really benefitting from low base rates. Wherever you go the actual lending rates are much much higher. Look at mortgages for example. Historically mortgages were always approximately base rate plus 1%. You cannot find any mortgage for say 1.5% in the UK. The same applies for business loans. Historically business loans were always between 2 and 4% over base. Again, you will find it very hard to obtain a business loan at 2.5%. So where is the magic trick? It seems that low base rates have only one benefit: helping banks to borrow cheap money from the Bank of England (I think that is called Quantitative Easing) and then buying government bonds. If this is your financial model then clearly you are not motivated to lend to small businesses. And I wonder what will happen to the high "lending margins" when Base Rates are starting to rise?
What is your opinion?
Henry Ejdelbaum
A better Idea for Quantitative Easing - From ASC Finance for Business
Posted on 12th April 2012 by Henry Ejdelbaum
I am sure you read in the news that the Bank of England is throwing in another £50 billion into Quantitative Easing. Remember this is not money which goes to the economy this is money which goes to the banks so that the banks can sell government bonds back to the Bank of the England and can buy more government bonds from the treasury. I am sure it is good business for someone. I am also sure that it is not good business for small businesses and SMES because those funds simply do not reach that sector of the economy. Yet it is ever so important. A recent article by Richard Tyler in the Daily Telegraph outlined how important it is to give business grants to small businesses and how beneficial it is for the whole economy. So my suggestion is this: why not use the £50 billion and produce a direct grant system to small SMES - perhaps to buy more machinery or equipment to increase their productivity or to employ staff (in other words to link into anything which benefits the wider economy). I somehow feel that such an approach by the Bank of England would have a much bigger multiplier effect for the underlying economy.
I would love to receive your feedback.
Henry Ejdelbaum
Where has the old fashioned bank manager gone? - From ASC Finance for Business
Posted on 05th April 2012 by Henry Ejdelbaum
We all know that the old fashioned business bank manager has disappeared from the branches but we undertook a little bit of research the other day and checked the main high street banks websites for the term bank manager.
You will probably guess what the result was. Five out of six websites did not use the term bank manager any more. So the bank manager has not only disappeared from the branch; he or she has also disappeared from the vocabulary of the banks.
A new term used is “relationship manager”. That is fine if there is a relationship to be managed but with all decisions being centralised the main task of the relationship manager seems to be to manage the communication between the client of a bank and an anonymous credit committee or underwriter or risk manager (or whatever the term is). Would it not be better to call them “messengers” or “message managers”? What do you think?
Henry Ejdelbaum
Message to our Banks - Businesses want to grow (and need to borrow) - From ASC Finance for Business
Posted on 29th March 2012 by Henry Ejdelbaum
We’ve undertaken a comparative analysis of the reasons why businesses seek finance. To simplify the results we have grouped them into 3 categories and compared 2010 with 2011:
- Entrepreneurs wishing to acquire a business Dropped by 6.6%
- Businesses wishing to re-finance existing loans Increased by 43%
- Existing business with existing loans wishing to expand Increase by 167%
What does it mean? Well it is pretty clear that contrary to what banks say, when they defend their “missing the target with Project Merlin” – businesses want to expand and want to grow. This corresponds with our anecdotal evidence which suggest that the general level of enquiries has not dropped by much. In fairness though we sometimes find that there are still unrealistic expectations by some business owners and entrepreneurs who still seem to expect lending criteria like those in 2007. Well, those days have gone and for good reasons too.
But our message for 2012 is clear: finance for business – whether it is business loans, commercial mortgages, invoice discounting or for property development – is available and can be arranged. If you have a sensible and interesting project then it is worthwhile pursuing your ambition despite what you read and hear: finance for your business is available.
Henry Ejdelbaum
Corporate Cash at Record £731 billion - From ASC Finance for Business
Posted on 22nd March 2012 by Henry Ejdelbaum
Apparently British companies' cash holding stood at a record of £731 billion at the end of 2011. Put it in another way, the UK corporate sector has more than enough liquidity or cash to service the entire financing needs of all British small companies.
There is now a new initiative with another government commissioned report to get the money from a big company to be lent to smaller companies (direct or indirectly). But I am not getting this. Surely this cash is not held in those companies' basement vaults or under their chief executives' mattresses. Surely this cash is held in British bank accounts. In other words the banks can use the cash in their ordinary course of business, like any other deposits. So what are they doing with this cash? I still have the suspicion that rather than using this liquidity to fund small businesses it is used to buy Government bonds which appears to be a more attractive proposition for most lenders. Could this situation be an "unintended consequence" of the quantitative easing programme?
One of the solutions suggested is that big companies should pay their smaller suppliers faster. I agree that this will help but I don't think that this is the wonder pill. I think there are two conditions which have to be met for economic activity to improve. Firstly, businesses needs to believe that investment is an attractive alternative (even the big ones - can you imagine how the economy would benefit if all that cash was invested in the UK). Secondly, businesses need access to sensible finance (sensible in the sense that sensible expectations of the borrower are met by sensible terms offered by a lender).
Henry Ejdelbaum
You don't need a dentist to pull out your tooth - From ASC Finance for Business
Posted on 15th March 2012 by Henry Ejdelbaum
Despite what many press articles and other interested groups suggest, business finance is available. The banks are lending. They are not lending as they did in 2007. But then again does anybody really want them to lend like they did in 2007 - let me remind you of a few examples: 100% mortgages, self-certificate mortgages, business loans without accounts, investment property finance at 95%, and so on. Nobody really wants to go back to that.
Business finance and property finance can be arranged and in fact we have improved our conversion ratios by 16.9%. So it can be done, but it is hard and it takes a great deal of effort. It requires specialist skills and a lot of experience - it simply can't be done the way it could be done in 2007.
Henry Ejdelbaum
Sale of Lloyds and RBS branches - has anyone asked the clients? - From ASC Finance for Business
Posted on 8th March 2012 by Henry Ejdelbaum
You may know that both Lloyds Bank and RBS have been forced to sell several hundred branches. That was decided by the Government and the European Commission. I am not getting involved in the political discussion but I have a question. Has anybody asked the clients whether they want to be transferred? The reason why this is an important question is because any transfer from one bank to another is quite a troublesome affair. It is difficult enough for personal bank accounts. However, what about business accounts? What about businesses with substantial standing order or direct debit income? I will not be convinced that any transfer will be easy and it will thus involve a lot of cost and effort for individual businesses.and who will compensate for the additional expense?
So what appears to be a "reasonable" political decision (again I am not prepared to enter the political debate) will create additional red tape for individual businesses. I understand that the total number of branches involved is 932 and that means that the total number of customer affected is over 7 million. Add the wasted time and effort from the individual businesses - remember there is no evidence that the transfer of the branch will be of benefit to the individual account/business - and you will see then that this is a serious issue. A unilateral decision has been made but I suspect that many businesses would not wish to change their bank accounts just because the Government and European Commission have decided that this is a good idea.
What is your opinion?
Henry Ejdelbaum
AAA or Double Dutch - Take 2 - From ASC Finance for Business
Posted on 1st March 2012 by Henry Ejdelbaum
I am sure all of you read in the press about the "downgrading of the Credit Rating from AAA" for the UK by some of the rating agencies. I still haven't figured out what this really means because the last time I investigated I found out that when the United States was downgraded their interest rates actually dropped (in other words it was a benefit to the USA).
However, what I wanted to discuss is the question.who are the people behind the rating agencies (Standard & Poor, Fitch, Moodys etc)? Are these the same guys who a few years ago gave positive gradings to the Greek Government or to the various firms which packaged up self-certificate loans? Are these the same guys who only a few years ago arranged ratings for Northern Rock or AIG or RBS? Well, we all know how good the rating analysis was but what we don't know is whether the same guys are still doing the same job - I hope for all of us they are not, otherwise I would suggest that we ask XXX to deal with all this AAA.
Henry Ejdelbaum
Good News or Bad News - High Street Closure Rates - From ASC Finance for Business
Posted on 23rd February 2012 by Henry Ejdelbaum
Another set of "de-motivating" statistics have been released. Apparently Britain's high streets are losing 14 stores a day as retailers struggle.
Of course this is bad news but like everything in business there is positive news on the other side of the coin. Now is a brilliant time to start a retail business because landlords will be extremely flexible and keen to offer advantageous terms. There are many businesses that still require a retail presence: hairdressers, nail bars, coffee shops, restaurants, to name a few. There are many other businesses which require a "property presence" and cannot be run via the internet, for example: children's nurseries, physiotherapists, car repairs to name a few more. Some of those businesses enjoy good trading prospects despite the doom and gloom. So if you have an idea talk to professional advisors and find out if it is a viable idea. Many professional advisors - ASC included - are happy to hold the initial meeting without any obligations which offers you the opportunity to find out how to take matters further.
Henry Ejdelbaum
£1 Trillion Debt - Where has the money gone? - From ASC Finance for Business
Posted on 16th February 2012 by Henry Ejdelbaum
So we all know now that the United Kingdom has a national debt of £1 trillion - whatever that means because I am sure you will agree with me that this really is "talking telephone numbers".
OK. I can live with the debt and I can try to understand the figure. What I cannot figure out though is where the money went. Most of our clients borrow money for a specific purpose so if a client borrows £1 million to develop a hotel he or she will know where the money has gone once they are starting to re-pay the mortgage. Do we know what happened to our £1 trillion debt?
Where has the money gone? If we can see where the money has gone at least we can start to understand whether there was a benefit. I have a suspicion that a more detailed analysis will show that a lot of this debt has been used to fund expenditure and not to fund investment. That is really a political question which is outside my remit. I just want to contribute with my question to help us understand and perhaps to help avoid similar problems in the future.
Henry Ejdelbaum
George Osborne's Advice: Hamster food for China! - From ASC Finance for Business
Posted on 9th February 2012 by Henry Ejdelbaum
The other day I spent an evening with about 250 business people, real business people - a pet shop owner, an insurance broker, a telecoms broker, a property developer and so on. During the evening we listened to a speech by the Chancellor. After the obligatory talk about the various tax changes, budget constraints and all the other initiatives introduced by the government he went on to explain his vision for growth. It was ever so simple. He referred to the emerging markets such as Asia and the East and that doing business with the emerging countries will be the solution. Somehow it felt as though the speech was addressed to another audience and that it had been given before. I totally agree that Asia offers fantastic opportunities - for large companies which have an export focus, but the audience catered for the UK market (in fact for most of them the focus was "local" rather than "national"). Was the Chancellor really suggesting, that a pet shop owner should try to sell hamster food to China or that the local insurance broker try to sell car insurance to Malaysia.?
Anyhow, rather than being just critical let me float some ideas which might help small businesses to grow. Find out what your clients really want by talking and speaking to your clients as often as you possibly can and then adjust your product and services accordingly. Engage in intelligent marketing in your local area, provide extra service like free delivery or increased opening hours. Seek help in those areas where you do not have expertise. Yes some of it involves costs and some of it involves more hard work. But after analysing many business plans for our clients we see that there is a real appetite for starting and building businesses. There are business people who see the opportunities and who are focussed on taking advantage of them. It could be a nail bar chain or a cookery school for African food, an on line print business or a smartphone application studio, a local cafe or a boutique hotel - there are innumerable success stories out there.
Henry Ejdelbaum
Are Bridging Loans a Good Tool for Business Finance? - From ASC Finance for Business
Posted on 2nd February 2012 by Henry Ejdelbaum
The number of bridging loan providers has increased sharply and published statistics suggest that there has been an increase of 27% in the number of bridging loans taken out in the past twelve months. My question: is - is this necessarily good news?
By their very nature bridging loans are more expensive and provide lower loan to value ratios; the key feature of bridging loans is of course that there has to be a clear "exit strategy" in place, in other words both the borrower and the lender need to know exactly how the bridging loan is being repaid. If the idea of the bridging loan is only to renew the bridging facility again and again then it is a pretty expensive way of arranging business finance. On the other hand, bridging loans can be very flexible and very often there are fewer underwriting hurdles to jump. So clearly there is a market for this sort of finance. Is the market expansion a function of real demand or is the explanation merely that very often bridging loans are used because the traditional business finance providers apply very restrictive underwriting criteria.
So let me make it clear that I'm not against bridging loans per se. I am just raising the point that it appears that bridging loans may be used more often than necessary where other sources of finance would be more suitable.
I'd be keen to learn of any situations where you believe that bridging loans were arranged incorrectly.
Henry Ejdelbaum
The Bank of England looks after small businesses - From ASC Finance for Business
Posted on 26th January 2012 by Henry Ejdelbaum
The Bank of England looks after small business.or so we are allowed to believe. However, let's have a look at the bank's financial policy committee and who sits on it. If you look at the CVs of the members you will be impressed. They are all successful, intelligent and decent people. However, they have one common denominator; they have no experience whatsoever relating to the establishment, operation and development of a small business. I am sure you'll agree that specific experience in a specific field (ideally accompanied by a successful track record) might be more useful for small businesses.
Henry Ejdelbaum
Risk - Regulation - Common Sense - who is winning? - From ASC Finance for Business
Posted on 19th January 2012 by Henry Ejdelbaum
Clearly common sense has lost. I think a lot is due to the increasing demand of regulation. Let’s look at mortgages or business loans. Obviously there is a risk for the borrower and for the lender. But it seems that regulation treats everything the same. A first time buyer who is looking for a £100,000 representing 80% of the value is clearly taking a different risk than a millionaire business person who wants to borrow £1 million on a £5 million value. Clearly the borrowers are taking different risks and the lenders have to use a different risk analysis. But we all know, this is not what is happening, and clearly we need a different regulation for each scenario. However if we need different regulations for each scenario then regulation will increase out of proportion (one could actually say that is has already happened).
And this is why I want to come back to common sense. If borrowers and lenders both apply common sense then there would have been much fewer self-certificate mortgages, buy to let mortgages, unsustainable business overdrafts, over geared development transactions etc. In other words regulation does not take away the need for common sense.
Henry Ejdelbaum
The reality of Government Initiatives - From ASC Finance for Business
Posted on 12th January 2012 by Henry Ejdelbaum
Another initiative that never took off - No surprise there then!
A little while ago I wrote about the tsunami of initiatives by the Government and suggested that rather than creating more “flagship” ideas the Government should focus on creating conditions to increase confidence.
The other day I received an update on the “Homeowners Mortgage Support Scheme” which was introduced by the last Government in 2009. The scheme closed to new registrations in April but not because it was successful. Originally it was suggested that this scheme would help 9,000 borrowers but at the end there were only 60 registrations – (hold on - the housing minister has just confirmed that “to date no payments have been made”).
If you have any ideas how the Government can create conditions to help businesses to operate and develop their business then please let me know and I am happy to publish it.
Henry Ejdelbaum
Guess who is dispensing an array of marketing advice? - From ASC Finance for Business
Posted on 4th January 2012 by Henry Ejdelbaum
I received the following mailshot the other day – I am just quoting some sentences which I found fascinating:
‘Following the economic crisis….customers want to enjoy a meaningful relationship with the companies they choose to engage with.’
‘Businesses of all sizes can benefit from using technology as a way of making customers feel valued.’
‘I strongly believe that today’s consumers value honesty above all else….it’s about mutual respect.’
‘Trust, loyalty and empathy matter to your customers and ultimately to your success.’
Now I will let you have three guesses which industry the mailshot is coming from:
1. Second hand car salesman
2. Business banker
3. Life assurance salesman
I think you can guess who published the above. I just love it when I receive such emails which are so removed from the truth. Based on our experience I can only suggest that deeds speak louder than words. Trust has to be earned - one has to deliver first and then write later. Writing first when the track record confirms that you don’t deliver does not endear you to today’s modern customer – and by the way this is a bank which publishes, for example, lending criteria of up to 70-75% for an investment property, but when applying, their internal & unpublished criteria you normally won’t be able to obtain more than 50%! I’d love to hear your opinion
Henry Ejdelbaum
2011 Blogs
Marketing advice from a bank manager - From ASC Finance for Business
Posted on 19th December 2011 by Henry Ejdelbaum
I got a leaflet the other day from a famous bank where the Executive Director (sic) is dispensing his advice. He suggested that “businesses of all sizes can benefit from using technology as a way of making customers feel valued, such as using new media as a way of responding promptly….”. I wonder if this senior executive has heard about the story of Rachel Brown. Mrs Brown is running a small business making cupcakes. She got suckered in to doing a voucher scheme with one of the new media companies. The idea was to discount her normal price and sell via the voucher scheme. The problem was that the scheme was successful and about 100,000 cupcake orders came in. In order to fulfil the orders Mrs Brown had to employ more staff. The problem then was that the price of the voucher scheme for a dozen cupcakes was agreed at £6.50 with £4.00 going to the voucher/online company for their marketing efforts. The result was obvious; the margin was too thin to cover the additional expense. Our enterprising business woman lost an awful lot of money. I wonder whether her bank manager considered all the implications before dispensing marketing advice?
Did you receive any business advice from a bank manager which turned out to be a little absurd? Please let me know.
Henry Ejdelbaum
Bank of England v Treasury - From ASC Finance for Business
Posted on 12th December 2011 by Henry Ejdelbaum
You got to love it when our learned leaders contradict each other in public. The battle ground this time is house ownership. The Bank of England calls for less owner occupation and the Treasury has announced a few days ago (a few weeks ago) that they would be spending £400 million (sic!) to kick start house building in the private sector. In addition, they want to introduce a mortgage indemnity scheme.
So who is right?
Bear in mind that in recent years there has been an increase in private sector rental because people cannot afford to buy - but rents are now so high that there is now a question of affordability.
So, is property development not a simple question of supply and demand? But then who controls supply - If it was house builders there is no question they would increase the supply to meet the demand but I think the big problem is our planning laws which restrict the supply of land for house building. There are loads of unused Brownfield sites as well as other unused sites nationwide, but go and try to get planning permission to build some residential units. The reason why there is such a low supply is simply because the cost of acquiring a property with planning permission is approximately 35% of the end value. This is clearly something to be done by the Government rather than arguing with the Bank of England.
In addition if you decide to build a development will you be able to get the finance? The simple answer is no you won’t. This is because most banks are so risk averse that they will not support a development scheme. So again there is food for thought for the Bank of England – provide conditions that lenders will be able to provide sensible finance for property development.
Henry Ejdelbaum
Posted on 5th December 2011 by Henry Ejdelbaum
Do Businesses really need another government scheme?
After reading about the new ‘National Loan Guarantee Scheme’ courtesy of George Osborne - I breathe a sigh of frustration. Not only is this set to follow in the footsteps of previous schemes which became failed initiatives it is a boost to the red tape industry!
No doubt it will be another scheme to join the tsunami of failed initiatives. Just ask yourself, what happened to the Enterprise Finance Guarantee Scheme – why is there such a slow uptake? What happened to the Enterprise Capital Funds? Local Enterprise Partnerships? Project Merlin? The list is endless and it all seems to be entangled in red tape.
It’s baffling how they can’t learn from the past - rolling off one initiative after another clearly isn’t working. With the excessive amount of administration required time and extra costs businesses are unable to spend time jumping through hoops and run their business at the same time? We have even had a bank manager tell us that with the amount of administration involved when applying for these schemes - he doesn’t want to do it.
Businesses need a solution to help them stay afloat in this climate and the government’s scheme of underwriting the loans is far from the best way.
Henry Ejdelbaum
Money Laundering Regulation Going Mad - From ASC Finance for Business
Posted on 28th November 2011 by Henry Ejdelbaum
Here's a real experience from one of our clients.
A father guaranteed his daughter's mortgage. He was already the client of the bank concerned. The bank insisted that the daughter receive independent legal advice - fair enough. So, in the first instance the bank carried out its anti-money laundering procedures for the daughter. Then the solicitors acting for the bank decided to carry out their anti-money laundering procedures for the daughter. If that appears to be a little bit over pedantic, wait. The bank's solicitor then decided to carry out their anti-money laundering procedures for the father although he was already a client of the bank.
Now I am not against anti-money laundering procedures, I think in principle they are a useful tool in the fight against financial crime but I am wondering how much time and effort is wasted in the economy because people apply these rules without thinking. I also wonder if the Russian oligarchs who are buying big properties and businesses in the UK had to undergo the same procedures (can you imagine Abramovich being asked for his driving licence and a utility bill when he bought Chelsea Football Club?).
Henry Ejdelbaum
Posted on 21st November 2011 by Henry Ejdelbaum
We all know about the RBS story - what happened and why it happened. Fair enough in a way that’s history and RBS is in good company with the other banks. I do like their marketing though. If you read their marketing you believe the world is in order and RBS is the saviour of small businesses. I can stomach this to a degree because I know they are trying to get more business in.
Where it gets absurd is when RBS is spending money to publish their credentials as "Advisors for Innovation and Managing Risk". I am not kidding . In their glossy magazine called ‘In Focus’ which appears in Management Today, RBS is stressing its virtues in managing risk. I just have a simple question - who would want to take advice from RBS about risk management? I don’t think their track record is an endorsement and I wonder if they should focus on different areas of marketing.
What do you think?
Henry Ejdelbaum
Are Bankers bonkers (or are we bonkers?) - From ASC Finance for Business
Posted on 14th November 2011 by Henry Ejdelbaum
Today I read that banks profits are currently rising because of "Fair Value Accounting of Own Debt". I immediately sense that this has nothing to do with good lending or customer service.
I think I understand this as follows. Banks have their own debt, but if the markets think they are a bit shaky, the value of that debt decreases and can be bought in the market for less than the issued value; in other words banks have to pay less to buy back their debt. That means they will spend less and their profits might go up. It's hypothetical - but they can do this valuation and run it through their accounts. So that means the worse a bank does, the lower the value of their bonds, the higher their potential profit. There is only one word for this... "bonkers"
If you think I am making this up, read the financial press (ok I simplified it a bit for the purpose of this blog). Apparently we are talking some £10bn of profits resulting from these accounting procedures.
Can you imagine any of our clients or in fact any small business going to a bank suggesting that the above accounting procedures should be considered when applying for finance. We all know what the answer will be. Should the banks and perhaps the government focus on abolishing all these rules, and for the avoidance of doubt not introduce new ones? Maybe transparency will create conditions for the economy to move forward and grow?
Henry Ejdelbaum
Incentive for Banks - Quantitative Easing Translated in to English - From ASC Finance for Business
Posted on 7th November 2011 by Henry Ejdelbaum
"I can't guarantee that it means that bank lending will rise, but what I do believe is that it won't fall as far as it might otherwise have done" - I am quoting Mervyn King the Governor of the Bank of England when he announced that the Bank has injected £75 billion into the economy.
The point is that the money has not been injected into the economy, it has been injected into the banking system. What do banks do with the money? Well we know that they are not lending £75 billion to small businesses. We also know that they are not investing into businesses which are generating new employment.
In the old days it was called "printing money" but such honesty is no longer popular, especially when inflation is running at a twenty year high. Today it is called "quantitative easing". There is a wonderful animated video on You Tube (http://www.youtube.com/watch?v=PTUY16CkS-k) If you've got a few minutes go and watch it - it is fantastic.
Henry Ejdelbaum
Economic Advisor required - No experience necessary? - From ASC Finance for Business
Posted on 31st October 2011 by Henry Ejdelbaum
What springs to mind when you hear the word politician? Apart from the 'obvious' we may think graduate, well educated, articulate and possibly sympathetic to the nation (well, the last one may prove debatable) but one adjective that is generally missing is 'experienced' - something that we all know comes with age.
Have you noticed the trend that at each political conference there is a speech by a teenager? All the political parties are the same! It is mind boggling to think that 16 year olds are discussing the economy, the country's welfare, tuition fees and the job market - and all I find myself asking is why? In the days when there were jobs that needed filling it was not unusual to see "No experience required". This now seems to be the attitude of the parties when they are selecting candidates, too many of our modern politicians have known no work other than politics, which brings me back to our teenage political gurus who lecture at the conferences - they have never earned a living, paid tax or brought up kids - both the teenagers and the politicians are disconnected from the 'real' world. In fact, one senior politician admitted to our MD recently that he has never filled in a mortgage application form: surely the right man to help supervising the banks?
Henry Ejdelbaum
Trust me I am a Banker - From ASC Finance for Business
Posted on 24th October 2011 by Henry Ejdelbaum
Let me provide you with an insight into how the “bank manager” role has changed in the last few years! This is a true scenario:
A client of ours has a loan for several million £s with a high street bank and quite rightly has the habit of checking the monthly computer produced statements carefully. For the last few years he has had no real problem, however, this month he noticed the bank overcharged him by several hundred £s.
Now the story begins. When he contacted the bank nobody knew who is dealing with or who could resolve this matter. The original lending manager couldn't help, the relationship manager couldn't help, the admin manager couldn't help, and customer services couldn't help and so on. Apart from wondering why no one could help, our client was perplexed at the level of service being offered to a 'valued' customer. I am not going to name and shame and quote from the bank's website or their mission statements, because as you guess the way they want to see themselves is in stark contrast to the way they operate.
After a while I found out what the problem was: about 9,000 accounts had been overcharged by one day, because of a computer glitch. In other words, we are talking big money. But now comes the "interesting" part of the story; although the bank recognised the problem and wrote to all their clients whilst organising the correction with a credit to the account – rather than debiting the account within a few hours of the 'glitch' happening (bearing in mind these are large valuable clients) they processed the credit 9 days later: That means that clients will be charged 9 days interest next month on the ever so slightly higher amount. Multiply this by 9000 and Arthur Daley would be jealous that he did not work out this nice little earner – maybe it is easier to trust him?
Henry Ejdelbaum
Edward Davenport is coming back - From ASC Finance for Business
Posted on 17th October 2011 by Henry Ejdelbaum
This week's papers were full of articles about the schemes of Eddie Davenport. I am quite surprised at how long it has taken the marketplace to wake up. Davenport's features were pretty standard: high showbiz profile, glossy office address, promises which seemed to be too good to be true and so on.
Yet so many people have fallen for the scheme. The question is why. Probably because they were desperate.
In desperate times desperate people do desperate things. The answer is not more regulation or more government interference. The answer is for borrowers to apply common sense. Whenever there is a recession, whenever banks tighten up these types of loan fraud swindlers turn up. The list is long and we've seen them all. The common features are very high upfront fees and promises of an easy ride when the borrowers know that their requirements are difficult to fulfil.
So if borrowers know they have difficult requirements then they need to work with a team who acknowledge that they are difficult, who will explain the chances of success and who will then work their hardest. A team which can be checked simply by looking at its track record.
Henry Ejdelbaum
After the Tsunami of Initiatives - From ASC Finance for Business
Posted on 10th October 2011 by Henry Ejdelbaum
The government is producing one initiative after the other to help arrange finance for small businesses. The list is endless and I am happy to admit I am one that is not jumping for joy.
Their new "brilliant" idea: "Credit Easing". If it is as complicated as the EFG scheme we are likely to have another failed initiative to add to the list.
Its apparent most of the schemes are just so riddled with red tape and complications it automatically discourages businesses to apply. Take for example a quote from a government publication. "Community investment tax relief accredited Community Development Finance Institutions are able to raise lending capital through the Community Investment Tax Relief Scheme" - if you understand please contact me.
I wonder if the Government should leave the lending to the banks and the borrowers and should just concentrate on creating conditions which make people want to do business and the borrowing and lending will follow automatically. The fact is that the SME sector has currently net cash on deposit because it has learnt that over gearing is not sensible. The other fact is that weakening world economies, deepening doubts over the competence of business leaders, confusing messages from politicians do not increase confidence. Confidence is the key motivator for small businesses to invest - they will do so when they see a benefit for the business operation; they will not do so just because a politician has a great idea.
If you want to study more initiatives, what about the following : Enterprise Guarantee Scheme, Independent Commission on Banking, Local Enterprise Partnerships, Enterprise Capital Funds, Project Merlin, Lending Standards Board, Capital for Enterprise Limited, Community Development Finance Institution, Community Development Finance Association, and so on.
Henry Ejdelbaum
Comments
Posted by Caroline on 18th October 2011
Thanks for using the time and effort to write something so interesting.
Posted by Lesley Taylor on 10th October 2011
You made some really great points in your material here. I couldn't agree more with you. I hope many people gain access to this information.
Modern Marketing - Is Spelling Important? - From ASC Finance for Business
Posted on 3rd October 2011 by Henry Ejdelbaum
There are two different types of school. There's an old fashioned school (I am not saying that this is necessarily wrong) which talks about the demise of good spelling and grammar and links this with a problem with modern technology. There are many websites and many blogs discussing this topic.
On the other hand, there is a modern school which says that the most important aspect is the fact that the reader understands. For example, there was a test at Cambridge University which goes as follows:
"Aoccdrnig to rseerach at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a total mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. Amzanig huh?
PS: Hwo'd yuo lkie to run tihs by yuor sepll ckehcer?"
Perhaps you are wondering how you can read the above so easily?
The point of this line of research is that proficient readers read most words (except very long ones) principally through the first and last letters and a rapid recognition of the general shape and content of the entire word. That's why we typically read misspelled words with no trouble.
I wonder what you think because ultimately it is very important for all our marketing if we understand how the receiver of our marketing messages thinks.
Henry Ejdelbaum
Call Centres - From ASC Finance for Business
Posted on 26th September 2011 by Henry Ejdelbaum
A new "earth shattering" research has been released. Call centres have realised that clients get annoyed when they are forced to deal with a call centre and have to communicate with somebody who hasn't got a clue what they are doing. The research confirms "a good customer experience is essential". So a number of companies have not found the holy grail and think it is better to put enquiries straight to experts to let them resolve any issues. It is now called the "right first time" model. I am laughing about this because we have used this model for the last 40 years. ASC doesn't work with call centres. If we receive an enquiry it is dealt with straight away by an experienced Director. We don't call it anything sophisticated; it is simply part of our DNA - so I am a little bit confused why any research was necessary - would the money not have been better spent on a donation for a charity?
Henry Ejdelbaum
UBS and You - From ASC Finance for Business
Posted on 12th September 2011 by Henry Ejdelbaum
It was a catchy marketing phrase: "UBS and you". Now the question is how does it affect you - what are the repercussions? Yes there will be an investigation and probably more regulation; and yes you, the reader and business owner/entrepreneur will have to pay for it. There will probably be more tightening in lending to small business, because that's the way things go: the big and clever (or perhaps not so clever) boys lose tons of money and the small guys, somehow, have to pick up the tab.
But what is more intriguing is the department in UBS which caused the loss. It's called "Delta One" like a good action movie - but movies have a director who can direct a positive and happy outcome. Banks seem to have directors who like to gamble - because the underlying business of "Delta One" was nothing more than gambling; no kidding or spin (and no customers involved): "Delta One's" function was betting on small movements in the stock market!
I have met thousands of business people in my working life and some of them took gambles in their decisions but I have not met one small business owner and entrepreneur [other than bookies] who set out with a business model based on gambling. So - let's go back to our business and get on with developing and operating our businesses (and looking after our customers).
Henry Ejdelbaum
Comments
Posted by Bare Minerals Store on 30th September 2011
Surely a perfect piece of writing! We've book marked it and sent it out to all of my friends since I know they'll be intrigued, thank you very much!
Double Dutch or Triple A (AAA)? - From ASC Finance for Business
Posted on 12th September 2011 by Henry Ejdelbaum
Double Dutch is certainly right! Dipping in and out of recession since 2008 - not a lot comes as a surprise anymore - but what is happening to the global economy is certainly Double Dutch. Clearly nobody knows what is going on - the only thing we know is that the 'clever' guys, in this case the bankers, have not been so clever after all and have made some pretty bad business decisions. The question on our mind is how is it going to affect us all?
Bearing in mind that these are probably the same folk who are now assessing your application for finance - the likelihood of it being granted is slim. It looks as though they will probably just add more obstacles in your ability to run and develop your business (whatever the politicians may say). It is slightly worrying to think those same folk are in charge of whether you receive a yes or no in your finance request and it is worth having a think about what implications their foolishness may have on your application. Or put it another way: Put two and two together and you get..
Henry Ejdelbaum
Undercover Survey Finds Banks Really Won't Lend - From ASC Finance for Business
Posted on 5th September 2011 by Henry Ejdelbaum
An interesting article in the Mail on Sunday and in the September issue of Moneywise magazine by Jenny Little. OK I am little biased because I did provide some input confirming that "Project Merlin has failed. Banks just don't want to lend to smaller businesses".
However, I would like to make an additional comment. Yes all the banks seem to apply procedures and rules and have no entrepreneurial antenna. Bank managers are simply no longer the business advisors probably because they are stifled by their rules and regulations (but we also need to consider that their track record in the past few years is not encouraging). The entrepreneurial "old fashioned" bank manager - clearly this species is now distinct. Bank Managers have no discretion, they are targeted to sell credit cards and insurance, they are prohibited from applying any business common sense because all decisions are centralised. This of course does not help small businesses and they have to look to other people.
For more details on the articles by Jenny Little please go to our website here and here.
Henry Ejdelbaum
Lenders keep zombie companies alive - From ASC Finance for Business
Posted on 30th August 2011 by Henry Ejdelbaum
A recent survey by KPMG found that there are now a fair number of so called "zombie companies"; these are basically companies which just about can afford to pay interest but nothing else. Lenders do not want to push those companies any further because they are worried of making provisions on their book and/or having to review the lending to similar companies. Unsurprisingly the majority of these companies are SMEs!
This is not a helpful approach to those companies who need better support and some better ideas to re-structure their affairs. I also wonder what influence this policy has on the way banks treat their other business clients - it looks like a giveaway to me!
One thing is thus clear - this is another "message" that it will get more difficult to raise finance for a business venture, unless you work with a strong team (unless you have all the time in the world and don't have to focus on running and developing your business!)
Henry Ejdelbaum
ASC and Amir Khan and Business Finance - we are not joking - From ASC Finance for Business
Posted on 8th August 2011 by Henry Ejdelbaum
You wonder why I want to talk about Amir Khan. Well I was very impressed with his recent win and it reminded me of applying for business finance. It is similar to a boxing match. Applying for business finance is a little bit like this: You have to prepare to go the whole 15 rounds. You have to be prepared to take punches and rejection. You therefore have to train hard and you have make sure that you have the right team and the right partners to help you in this task.
Yes you could do it alone but if you are properly trained and if you have worked out the right strategy with the right advisors then you will dramatically increase your odds and you will not suffer the tiresome and rather sole destroying journey of being constantly rejected or being constantly bombarded with unreasonable terms and conditions.
But if you don't believe me, simply apply to all the banks on your own and enjoy the match - good luck!
Henry Ejdelbaum
Comments
Posted by Dave Wilcox on 16th August 2011
At the moment I'd prefer 12 rounds with Amir, than 12 minutes with my bank and feel that I'd not come out as battered.
The Demise of PowerPoint Presentations? - From ASC Finance for Business
Posted on 27th July 2011 by Henry Ejdelbaum
I came across an interesting article in the FT last week noting the existence of an 'Anti PowerPoint' (APPP) party in Switzerland. As strange as it may seem, this party is based on a very serious theory that wasted presentations are costing billions of Euros each year. This may sound a little farfetched, but I, like most other individuals have been subject to a fair few 'power - point - less' presentations in my time, designed with an array of coloured charts and graphs, which the majority of the time are as boring as the presenter reading the presentation. So the APPP could have a very serious point here. I am pleased to say we realised the ineffectiveness of PowerPoint presentations a long time ago and our ASC directors work with our philosophy which is still based on a person to person approach trying to find out what a client really needs.
Henry Ejdelbaum
Posted on 14th July 2011 by Henry Ejdelbaum
It wouldn't be too bad to read 2 articles which make different points. But what is puzzling is that both articles interpret the same data. One says that the bank funded SME Finance Monitor which we understand is providing the The Department for Business, Innovation and Skills (BIS) with benchmark information has just found that rejection rates have increased substantially. On the other hand I just read that "majority of SMEs are successful in getting bank credit".
So if two reputable interpreters of the official data can't figure it out - let me help. Firstly, I wonder why any research needs to be carried out in this respect because there is already an abundance of anecdotal evidence - in other words this piece of research just confirms what everybody knows. And I am siding with the first interpretation.
By the way, the research also shows that confidence in the banks is weakening. That's another piece of news which everybody knows. A while ago I likened applying for a loan with a boxing match. The client has to be prepared to go the whole fifteen rounds, has to be prepared to take a number of punches and to recover from a number of knock downs. The best strategy is therefore is to be fully prepared and to have the best possible team on your side before embarking on the journey to obtain a small business loan. There are simply no shortcuts possible.
So maybe I can make an offer to the Business Minister and suggest that we provide anecdotal evidence for free (and considering we are dealing with thousands of clients and professional introducers, we have sound feedback available) and the saving made by not incurring this expense can be used to reduce the national deficit!
Henry Ejdelbaum
It's time to step outside your comfort zone! - From ASC Finance for Business
Posted on 4th July 2011 by Henry Ejdelbaum
The banks way of saying no is getting more and more boring and through press and past experiences it's quite tiresome for all of us to hear. We know every business needs finance and through the extensive application of sometimes absurd lending criteria the banks continue make it increasingly harder for SME's to obtain it. The unfortunate truth is that the majority of declined business loan requests are through bank applications and people are now more inclined to find alternative routes to obtain finance.
If you are looking for business finance a good starting point is to start to think outside the box. Banks are no longer our trusted friend and brokers are no longer seen as an added expense. Banks shouldn't necessarily be our initial port of call - so if you need finance you need to begin assessing all your options in order to obtain it.
Henry Ejdelbaum
Project Merlin - From ASC Finance for Business
Posted on 9th June 2011 by Henry Ejdelbaum
I must say I do chuckle every time I read about project Merlin. Having spent many years in arranging business finance for SMEs it is so obvious the banks are pulling the wool over politicians' eyes - or that politicians just haven't got a clue what is going on. Yesterday I read a marketing spin from a bank: "85% of loan applications have been approved". The small print, however, suggested it was only loan applications submitted by the business development managers. This has nothing to do with applications made by clients. Our experience is simple, it is hard work to arrange business finance. It is a little bit like entering a boxing ring - you have to be prepared to go the whole fifteen rounds and you have to be prepared to take a number of hits.
Henry Ejdelbaum
We all just want a good night's sleep! - From ASC Finance for Business
Posted on 8th June 2011 by Henry Ejdelbaum
With companies' red tape limitations, businesses fear of losing clients and managing the burden of obtaining finance it's no surprise our sleeping patterns can be a little out of sync. As much as we like to think running a business is plain sailing, the reality is running a business isn't easy and unexpected situations tend to arise. As much as we would be thrilled to help control government legislation or take on the role as marketing consultant to assist in adding and retaining your client base - those areas are not our focus. The one area we can help is to relieve your burden in obtaining business finance.
Henry Ejdelbaum
Take the initiative like Branson and Roddick! - From ASC Finance for Business
Posted on 19th May 2011 by Henry Ejdelbaum
Every successful entrepreneur surrounds themselves with credible financial advisors. Sir Richard Branson and Dame Anita Roddick are just two examples. Being at the top of their game we forget that they started out like every other entrepreneur - an idea and sheer determination to make it work. But they didn't get where they are today without obtaining some form of expert advice.
Asking questions and seeking professional advice is an important part of starting and building a successful business. Whoever said asking questions or asking for finance is a sign of weakness evidently had bags of money and probably wasn't around long enough to succeed. It's a sign of having common sense and playing on individual strengths, enabling you to focus on managing and developing your business - and leaving the rest to the experts.
Henry Ejdelbaum
Do we not deserve more than second best? - From ASC Finance for Business
Posted on 18th April 2011 by Henry Ejdelbaum
With Banks and Supermarkets having extensive product lines, high volume of sales and low individual service they have grown to an extent where their customer service has fallen behind and their shopping experience can be less than perfect to say the least. Supermarkets economies of scale ensure they offer the cheapest price on food and for some of us price and convenience is worth the absence of good customer service and the presence of a fast paced no nonsense shoppers.
Gone are the days when we shopped in our local stores to purchase our groceries, where the owner knew us by our first name and when we could open up a tab and pay at the end of every week. We can see that banks are trying to market themselves as a 'local friendly branch' but they are blinded with a target driven atmosphere preventing them from getting to know their clients specific needs.
Applying for business finance is something businesses do once maybe twice so it's important to get it right. Convenience shopping through a bank may only provide you with one offer with one set of terms or browsing on an online financial supermarket lacks one on one interaction. If you get your finance lender and or finance terms wrong - the consequences could be detrimental - it is not as easy as throwing away the wrong ingredient and buying the right one. Go local with your finance needs and speak to the experts regarding your business finance.
Henry Ejdelbaum
Deals, Deals, Deals - Finance for Business can be arranged - From ASC Finance for Business
Posted on 2nd March 2011 by Henry Ejdelbaum
If you read the newspapers and listen to the politicians you might be forgiven for believing that it is all doom and gloom but whatever the economic climate - business must go on! It's a good time to focus again on your business
Every business needs finance - Finance for Expansion, for Acquisition or to Re-finance. Yes, arranging finance for business is nowadays a "hassle". Whatever reasons the banks give as an explanation, they do not really help, because it is still a mammoth task. This is where ASC come in. So, yes it can be done, but it is not as simple as the marketing departments of the Banks suggest - so many enquiries are declined, so many additional conditions are imposed, and this is before we even consider fees and interest rates.
Henry Ejdelbaum
The Government has fixed it - we can all go home - From ASC Finance for Business
Posted on 14th February 2011 by Henry Ejdelbaum
Why have I not read one positive article about the compromise riddled content of Project Merlin? All commentators seem to grasp that the details on the ground contradict the political statements. The details are simple; the banks have restrictive lending criteria, apply red tape wherever possible and cherry pick. Having said this it is not impossible to do deals it is just very hard work for business people and entrepreneurs to negotiate with banks when they also have to focus all their energies in running and developing their business.
Henry Ejdelbaum
WANTED! - The good old fashioned business bank manager! - From ASC Finance for Business
Posted on 4th February 2011 by Henry Ejdelbaum
Whilst we all advocate progress, some changes are not as useful as others. Many banks have had to restructure their operations, so if you need finance for your business you may encounter the following scenario:
- Talking to a 19 year old specialist "business banker" who has limited experience of business
- Speak to someone who asks lots of questions, messes you around for 6 months, and then declines your application
- Talk to someone who hides behind underwriters and regional directors and doesn't really care about you
Yet there is an alternative: ASC - as always straight and direct communication at director level!
Henry Ejdelbaum
Number of new regulations in Britain at record high - From ASC Finance for Business
Posted on 17th January 2011 by Henry Ejdelbaum
I was asked to comment on Regulation by FMWF (Financial Mail Woman's Forum) relating the Story the "Number of new regulations in Britain at record high". Here is what I said:
"It is a can of worms. A good idea on the political level often cannot be implemented on the front line. Everything is now so complicated that politicians just do not have the detailed knowledge or skill-set required. It is not party political. Politicians always have all these wonderful buzz words but do not deliver. They should move from the political catch phrase level to the real doing something level".
"It is not just the stupidity of regulation which creates problems for business, it is the unnecessary complexity. Take the topic of VAT on food: In 2010 the tribunals had to consider whether a Lucozade sports drink is food or drink, whether Subway's meatball Sub is hot or cold and whether an Innocent smoothie is food or drink."
You can find the full article at: Number of new regulations in Britain at record high « FMWF
Henry Ejdelbaum
Posted on 10th January 2011 by Henry Ejdelbaum
Happy New Year to you - may it be full of great fortune and success. Who says there aren't any new lenders? - We have just set up a new special relationship with a very reputable asset based lender - and: they deliver! So in cases where you can't use a property as security, we have specialist lenders to work with on your proposals.- for more information and to read recent cases of our successful specialist lenders in action, click here.
Henry Ejdelbaum
2010 Blogs
Posted on 1st December 2010 by Henry Ejdelbaum
Can you access the funds you need - the rates you want - terms you are happy to work with? If so, then you don't need to read on...
Here is another prime example how banks work today. An ASC client company had a £3m loan secured with their bank on a £8.1m commercial property portfolio with substantial rental income. The client also had other substantial sources of income with many years of audited accounts. Part of the loan was renewed in April this year and the second part was due this month - the same bank offered new renewal terms last week at 43% higher interest (from 1.75 to 2.5%) and 100% higher initial fees (from 0.75 to 1.5%). This is not a comparison between 2010 and 2007 terms; we are comparing 2010 to 2010! What do you think are the reasons for trying to squeeze clients like that?
If banks can treat top clients like this, I can only imagine how business owners generally are being treated!
Henry Ejdelbaum
Bad business decisions in the past are no excuse to blame banks - From ASC Finance for Business
Posted on 15th November 2010 by Henry Ejdelbaum
Yesterday I received an online trade magazine and it quoted a borrower who demanded that the "nationalised banks" should help him more. The borrower's financial parameters were described as follows: A Buy to Let investor with 55 properties, capital introduced 15% with a gearing of 85% on past values and he was very concerned that he would not survive any increase in Base Rates.
It seems that the original finance arranged was not flexible or suitable - I am not saying this just with "hindsight". Clearly this borrower is overgeared and according to today's stress testing rules would never be able to raise the amount of finance. But in fairness, according to any common sense stress testing (applied even 3 years ago), this type of financial and commercial strategy does not make sense.
So, yes one can blame the bank for being non prudent and granting the finance in the first instance. But equally the lack of prudent lender was complimented by that fact that there was no prudent borrower as well.
Henry Ejdelbaum
Why banks are structurally incapable of efficiency - From ASC Finance for Business
Posted on 19 October 2010 by Henry Ejdelbaum
I read yesterday a fantastic article in the FT by Tony Jackson.
It is a brilliant analysis why Banks make all the mistakes they make
- he says that, "most economic activities work best if people on
the ground are free to make decisions. In banking, by contrast,
decisions have been sucked into the centre. The result is huge
inefficiency and misallocation of capital".
It is above the usual
"bank bashing" articles and definitely worth reading. You
can find the article at http://www.ft.com/cms/s/0/4ee30888-da04-11df-bdd7-00144feabdc0.html
Perhaps I can make one proposal to help solve the problem: there is clearly no cross fertilisation operationally between banks and their clients. Bankers seem to be promoted through the ranks totally removed from the business experience. In fact all the bank managers I have met in my life have very little knowledge about the basic operation of a business other than what they learnt in some training sessions or perhaps read in some training manuals. In other words it is all theoretical know how!
Perhaps banks should employ real business people as "non executive consultants" (I emphasise the words real business people and not just professional consultants).
Anyhow the article is worthwhile reading.
Henry Ejdelbaum
The reasons why small businesses don't want to borrow - From ASC Finance for Business
Posted on 23 September 2010 by Henry Ejdelbaum
Everybody seems shocked that lending to small businesses is "tumbling". I am not. It is clear that SMEs are being battered by lenders - look at the interest rate charges. With base rates at 0.5%, lenders are charging 3 - 4% margins (if you're lucky), some are 5 - 6% and I know of cases at 6 - 8%. This is in addition to arrangement fees of 1.5 - 2.5%. I haven't even included legal costs, valuation fees etc which may add another 3 - 4%. And don't mention EFG, because this adds a premium of 2% to your costs.
So if you can survive the assault course of restrictive lending criteria (triple stress testing, down valuation, legal queries etc) "consolidation" sounds like a sensible alternative.
Henry Ejdelbaum
Positive lending criteria increases mortgage fraud - From ASC Finance for Business
Posted on 26 June 2010 by Henry Ejdelbaum
As I said in an interview with the Financial Adviser (part of the Financial Times) we see the potential for mortgage fraud increasing. Too many borrowers are being boxed into situations where they believe (and I emphasise "they" because I do not condone this) that the only way out is by being "economic with the truth" towards their lender.
There are various online groups discussing "shall I tell the truth to my lender?" The fact that there is a public discussion confirms this is happening.
Again, I do not condone this practice but lenders should be aware that their restrictive lending policy is a double edged sword.
Henry Ejdelbaum
Comments
Posted by Elaine on 10th October 2011
Easy to understand, I like it!
Please click on 2010/2011 blogs to expand or minimise.
