EU to hammer house building

Sadly I cannot link the Times article today but It would appear that the European Banking Authority has instructed lenders to categorise lending to business in precisely the same bracket as “non performing loans of borrowers who have defaulted”. For a number of reasons this is going to make lending a lot harder for smaller banks and building societies. In a market which is limited and pretty lukewarm at the present time, this is decidedly not welcome.

As a ruling this is chronically heavy handed. Bracketing one industry under one credit rating is crude at best and you really have to ask, yet again, what these bureaucrats really contribute when they have clearly found the application of a least a model of credit rating beyond them.

I also wonder if this has been in the air for sometime. Recent exploration of the commercial mortgage market on behalf of a couple of clients produced unexpected lack of interest from certain smaller banks.

However the key element here is the effect on housebuilding. Clearly this is not going to aid development and in the UK at least there is a desperate need to build

Margate

Picture postcards frequently do not accurately portray a resort and many would have said that in the case of Margate, that is a good thing. In the recent past Margate has earned a reputation for being a particularly run down and desolate resort

Yesterday was my first visit. I cycled the twenty odd miles along the coast from Whitstable. The objective for the day was to experience one of the more famous cycle coastal cycle routes and also to see an exhibition. Neither disappointed and both were fine examples of how a fading resort can regenerate itself into a sought after destination

Approaching Margate from the west entails passing possibly the worst and most run down beach front building in the country. Upon arriving you are greeted by a seafront which makes Blackpool look classy and is overshadowed by a grey and fairly run down Tower block. Not a good start but its only the start. The object of my visit looms around the sweep of the small bay and the Turner contemporary does not disappoint. Exceptionally busy but still a comfortable space for an excellent Grayson Perry retrospective. The gallery is a triumph.

And then you start to take in the surroundings. The remarkable old town is close by and the harbour sweeps round giving great views of that famously big sky so revered by artists

Art is Margates future. Strangely the straightforward Seaside fun resort does sit easily with the bohemian shops, small galleries and craft beer bars. Neither has been sacrificed for the other and it makes for an intriguing mix.

The beauty of Margate is that it is as if it has woken from a crisis of confidence and realised that as a destination it has a lot to offer. This brought to mind how and why destinations need to market themselves.

Specialisation is key. Cycling and visual art have never been more popular so Margate is in a very good place but there is a fine balance to the mix. You would not wish to see the weird and wonderful second hand shops replaced by chains and nor would you really wish to see the amusement arcades all turned into galleries.

It also brought to mind that even an enthusiast for the free market such as myself has to acknowledge that planning and controls are vital. Would private enterprise have built the Turner gallery and maintained free entry? How would the wonderful old town look if many of those strange shops were turned into Tescos or kebab takeaways? Who would have invested in the superbly signposted and quite stunning cycle route?

There is still work to be done of course but judging by the vibe and crowds yesterday, the place is most certainly succeeding where others struggle. I will be back

Peer to peer lenders on the march

Or should I simply say merely a threat to the banking industry but a very welcome addition for borrowers? I think I should and here’s why

A client of mine wishes to borrow £200k. His business is well established but he needs a cash flow boost to fund a major new contract of christmas. Pure supply contact to a major retailer so little realistic room for disputes

I will not divulge any further details and whilst I would not say they are highly rated for credit they would certainly not be the worst prospect around

The peer to peer lender did not come in cheap. 11% Apr and a hefty set up free of £6k (negotiated down from £10k). A bank would be about half bothe figures.

So it is obvious where to turn to isn’t it. But that’s the start of the problems. Frankly the response from the conventional banks was slow, bureaucratic and frankly in a couple of cases, rudely dismissive.

The Ptp lender was fully subscribed within a couple of days. The procedure was simple.

Cost against hassle. That’s being weighed up at this very time but my question is, what if the ptp lender lent at 7% rather than 11%? Judging by how quickly this was subscribed there is a fighting chance that could have been feasible?

And if they did manage to get the rates down to those levels then the banks are really going to have to think again.

To my kind they should be giving this a lot of thought right now. It’s not as if they have the business community’s and publics good will to fall bank on is it?

Supply chain finance. The future?

. Working hand in hand with a new lender in the market, I have been exploring potential clients for Supply Chain Finance

What is Supply chain finance you may well ask? In simple terms it is where the supplier is able to receive immediate settlement on its invoices from the client but at a cost of course. However because the lending is effected by the client rather than the supplier, the terms are often advantageous compared with standard invoice financing. This is because the client is frequently larger in scale and net worth and thus able to obtain much stronger terms. This has also been referred to as “reverse factoring” and a more detailed explanation can be read here

Of course, as is ever the case in finance, this is not always suitable for all parties and its my role to advise and assist

So how do we find potential clients?

My partner in this has made some astute observations which has narrowed the search but my input was based upon tracking the payment trends for a group of businesses in a certain sector. I have tracked their creditor days over six years and clearly a declining trend or simply plain bad figures are more likely to lead to frustrated suppliers who in turn are more likely to buy into such an arrangement

Clearly there are other factors but I am not inclined to divulge on line. However the key aspect to this is the very nature of marketing

Targeting is so very important. As we have found, it has taken numerous questions and discussions to hit upon what we believe is the right formula and this applies to any business and their markets

Once that is determined, then I use the data available from a very particular source

Again I am certainly not going to give all way but if you wish to know more, give me a call or drop me a line

Corbyn madness

This blog habitually steers clear of political opinion but does remain very aware that you cannot divest politics from economics and business finance. At the same time it can be argued that many political decisions do not greatly affect our world simply because there is a general consensus that liberal democracy and free markets work.

However we are now faced with the prospect of the major party of opposition in the uk being led by a someone very outside this mainstream of opinion

Many appear to believe that this is a “good thing”. Others rightly conclude that it doesnt really matter because he is “unelectable”. I agree that he is but am also a believer that a creditable opposition is valuable for the whole nation. Complacent governments are frequently poor governments

A Corbyn led labour party is a not credible opposition

Leaving aside his very sinister allegiances and the actual fact that he could even be viewed as a security risk, the issue that concerns us is his economic views. It probably goes without saying that a Corbyn administration would be very alienating to business and would drive down investment simply by its very presence but underneath the radar are policies which are truly economically illiterate

He much publicised “peoples qe” has been roundly criticised as being a trigger for inflation and even a total loss of economic control, but lets look at two other suggestions that have not been as widely publicised as perhaps they should have been.

1. Nationalisation. It has been suggested by his team that this could be “without compensation”. Effectively this is stealing back the assets from the shareholders. in the first instance this would surely be challenged legally but the wider question would be , what next? Aside from pension and investment funds losing value as well as individual shareholders seeing their savings wiped out, there would be an enormous collapse in market confidence. How could there not be? Investment would retreat to safer markets and any number of enterprises will simply ensure that they cannot be seized by the state by simply removing themselves from the Uk.

2. Right for tenants to buy property. This allied to suggested rent controls is completely the wrong approach to our current under supply of housing. Rent controls drive down property development for very obvious reasons but who will be beholden to an administration that would insist that your property is not yours to sell as you wish? Who would invest and develop under those circumstances?

Corbyn’s administration would be based on little more than simply targeting who is disliked, whether in business or international affairs, and then simply framing a policy to punish. There is little thought for the wider consequences of such actions which will clearly be counterproductive.

That is irresponsible government and should be rejected by labour members before the electorate deliver their humiliating verdict

Big changes to the european small claims

I hope that the excellent firm of Scottish debt recovery solicitors, Yuill and Kyle, will not mind me reproducing their text on this development. As ever, they have summarised these changes well

In June the European Council of Ministers approved a compromise with the European Parliament on a regulation amending the European Small Claims Regulation and the European Order for Payment Regulation, which have been in force since 1 January 2009.

The objective of the amending regulation is to make the European Small Claims Procedure more efficient, reflecting the technological progress made in the justice systems in the Member States, and to make the procedure accessible in a larger number of cases, in particular for businesses.

The threshold for a small claim will increase from €2,000 to €5,000, reflecting the need for a wider application of the procedure, particularly for SMEs; this amount may be increased further subject to a later review. The application of the Small Claims Procedure to remuneration in case of cross-border employment will also be considered in the same review.

The Member States will have to ensure that the court fees charged for the European Small Claims Procedure are not disproportionate or higher than the court fees for national simplified court procedures. Member States will also be obliged to offer remote means of payment for these court fees.

Although the procedure is normally a written one, the court can hold oral hearings. This will only happen, however, in cases where the court feels it’s not possible to render the judgment on the basis of written submissions or where a party requests one. The court may also refuse such a request, by giving reasons in writing, if it feels that an oral hearing is not necessary for the fair conduct of proceedings. Where there is an oral hearing, distance communication technology will normally be used and evidence will be taken via the simplest and least burdensome method. However if a party expresses their wish to be physically present at the oral hearing they will always be entitled to appear before the court.

The translation requirements (and related costs?) for the certificate of enforcement of a judgment given in the European Small Claims Procedure are minimised by limiting the compulsory translation only to the part which contains the judgement itself; claimants are able to use the European Small Claims Procedure when a statement of opposition has been lodged against a European Order for Payment.

For the purpose of serving documents, postal service and electronic means are considered equal. The judgments delivered under this procedure will be recognised and enforceable in other Member States without the need for a declaration of enforceability. The procedure is optional, offered as an alternative to the possibilities existing under the national laws of the Member States.

Secrets of CEOs

Another tiresome piece with successful leaders boasting about the secret of their success? Not quite. This is quite an interesting piece and one that fascinates myself whether applied to James Dyson or Jose Mourinho

The best advice is to “surround yourself with people better than you”. This is perhaps slightly misinterpreted as being “better” overall when I am fairly certain we are talking about specialist skills. I have had experience of fundamentally weak leaders being suspicious and feeling insecure with significant experts in their employment and it is a very destructive scenario. The skill of the best leader is to balance the various skills under their command and by doing so they will command the respect required

The boss of linkedin puts a strong premium on building a network amongst “friends” from an early age. There is a natural logic to this and certainly I have benefited strongly from maintaining a big network over a period of time but where is the crossover? There are contacts of mine who have become friends through business but using friends with the intention of building your business is a different matter altogether

James Dyson suggests that the key is not to be afraid of mistakes. He states that 50% of decisions will be “Wrong”. I think personally that may well be the case when developing a product but a rather unmanageable percentage if you are, like myself, largely giving advice. One size doesn’t fit all.

An interesting summary but I would add one further strength of successful managers and entrepreneurs. It is the ability to always look at any situation in the whole. To step back and weigh up the factors and then be decisive. The ability to manage the detail without being bogged down with specifics.

It is these contrasts that make the whole subject so interesting and why for instance, we find ourselves studying both political leaders and football managers to such a degree