Home > Uncategorized > The human element of lending

The human element of lending

Last week I attended an excellent event hosted by a prominent online lender and the conversation turned to the future of asset lending. It was suggested by another broker that in ten years time all lending will be through online portals. He was a nice enough guy if perhaps a little un-dynamic and maybe that aspect was key to his opinion. He was talking rubbish too

The idea that on going lending can be sealed by a simple exchange of documents is naive and could only apply to the most straightforward of cases. It really surprises me that there appears to often be a lack of understanding that lending is about the future and not past balance sheets.

This is especially appropriate when discussing invoice financing. An invoice financing arrangement is frequently a very long term relationship and the like any long term relationship, it is vital to know who you are dealing with.

Lenders will always rightly want to meet the parties involved. People buy from people. It might be a well worn cliche but it stands the test of time.

It could of course be retorted that invoices themselves are assets that already represent past trading but this misses the point. The invoice does not represent the current trading balance sheet and profit and loss and whilst these figures can be produced from current management accounting, the fact of the matter is that there has to be a high level of trust.

Lenders committing to balance sheets only are taking a higher risk than those that wish to form the whole picture. I will give two examples.

  1. The long established family business with a reasonable  balance sheet which has just been inherited by the less than bright son who’s preferred working day is on a beach in the caribbean.
  2. Facebook





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