What next for banks and SMEs?

A business partner of mine recently visited a big four bank with the intention of setting up an account for one of his enterprises. He was bluntly told that all the “business managers had been sacked” and “heres a number to call”

This is not unique amongst the the so called leading institutions and the overall impression is that they see small to medium banking as nothing more than a nuisance. Various government initiatives such as Project Merlin and EFG loans appear to have had little effect

The disconnect between those that run businesses and the banks is disturbingly vast. Earlier this year myself and a client suffered a lecture from an arrogant banker about “risking their money” and how businesses need to do this and that to manage their affairs. This was, to put it mildly, completely unacceptable from a failed institution that had to be bailed out by the taxpayer.

There is a feeling amongst businesses that enough is enough. SME’s drive the economy and they are entitled to support.

But its also up to the SME’s themselves to understand that there is a much bigger market out there than the high street lenders. They employ the biggest proportion of the uk’s workforce and have to produce positive results to survive. No one throws them a lifejacket when they fail

That also applies to their advisors. Finding the right financial support can be the difference between making and breaking an enterprise.

How many other peer to peer lenders are struggling?

The news today that Ratesetter are struggling with bad loans totalling £80m will no doubt be met with an element of sangfroid in the established lending market. The peer to peer lenders have not been welcomed as competition and in the case of at least one leading funder, seen as a bit arrogant. On the other side of the coin is the fact that they are a boon for small and medium businesses who can be treated with barely concealed contempt by the major banks.

Not a happy overall picture and one that brokers such as myself have to bridge. We naturally welcome the choice but also there are some observations that I would be inclined to make.

Although it would appear that some of Ratesetter’s lending has been baffling on any level, the PTP’s insistence that all lending can be assessed fully on numbers alone is absurd and is guaranteed to result in huge mistakes. Numbers only ever reflect what had gone before and little towards the further prospects,  which is precisely what your lending is dependent on. You have to understand the business. You should always meet the principles.

They have also been guilty of not tapping into the experience of experienced lending professionals. That is lunacy in my opinion. No product in an existing market can properly succeed without understanding the market it is in and it’s strengths as well as weaknesses

I sincerely hope that Ratesetter and others are hear for many years to come but to do so may require some significant changes in mindsets

New pre action protocol for debt recovery

Firstly I would like to thank Donna Goddard from Pitmans Solicitors in Reading for the updated information, the detail of which is replicated below.

This is quite an important development for businesses that experience difficult debts with consumers or sole traders and many will see this as overly weighted towards the debtor.

Personally I dont have a problem with the extended warning period. Seven days was really too short for individuals who could simply not have communication for such a period, but 30 days?

Also the onus would appear to be on the creditor to give reasons for rejecting a payment plan. Payment plans are a desirable solution but there are simply times when they are inappropriate and quite frankly it should not surely be down to the creditor to explain why.

It’s their money

A new Pre-Action Protocol for Debt claims will come into force on 1st October 2017.
The Protocol applies to all debt claims where a business is claiming payment of a debt from an individual irrespective of the value of the debt. The definition of “business” includes a sole trader and public bodies in business and “individual” appears to include a sole trader.
The new Protocol aim is to:
encourage early engagement and communication between the parties;
achieve settlement of claims without recourse of the Courts including setting repayment plans and alternative methods of resolving disputes;
encourage parties to act in a reasonable and proportionate manner;
Therefore, early disclosure is going to be essential under the pre-action protocol. An enhanced Letter of Claim which must detail the basis of the claim, including the details of any written or oral contract, and any charges and interest which have been added to the debt is required. Further, a Statement of Account, Information Sheet, Reply Form and Financial Statement are all to be enclosed with a Letter of Claim. Debtors will have 30 days to respond to a Letter of Claim and can request additional information and documentation during this period which must be supplied.
If a debtor indicates a need for time to pay, the creditor and debtor should try and reach an agreement to permit the debt to be paid by instalments, based on the debtor’s income and expenditure. If the creditor does not agree to a proposal for repayment, they will need to give reasons for this refusal in writing.
The new Protocol places the onus firmly on a claimant to make sure that the debtor is provided with a lot more information at the time of legal demand than is customary at present. However, the provision of this information at an early stage is likely to promote settlement of claims, identify and narrow issues and areas of dispute and ultimately reduce the need to reference matters to the Court for determination.
Failure to observe the new Protocol will expose the claimant to an adverse costs order being made by a Court or interest penalties.

 

 

Australia keen to trade

Not unexpectedly, The Guardian headlines Malcolm Turnbulls enthusiasm to seal a post brexit trade deal with this

Australia ready to do post-Brexit trade deal – but EU comes first

That is of course, not what he said but naturally because we are not able to sign a deal before actual Brexit in 2019, the EU would be pretty sluggish if it wasnt moving forward “first”

But then again they will need to get a move on. There are 27 states that need to agree and given that arguments over tinned tomatos  have stopped finalisation of agreements in the past, then i know who my money is on to put pen to paper first

Carillion and construction in trouble?

Notorious amongst subcontractors for their extremely tardy payments, Carillion look like they might be needing to hold onto all the cash they can.

Nicholas Hyett, equity analyst, at stockbrokers Hargreaves Lansdown, said: “Carillion looks like it’s trying to bail out a supertanker with a soup spoon. Despite the group’s best efforts debt is continuing to climb, and at an increasing rate, while the construction business seems to be hitting one hurdle after another.

Their shares have just crashed by 40% and whilst there is no immeidate indication that they are in serious trouble, the above analysis will cause alarm

The Commercial mortgage market has seemingly been sluggish for some time giving an indication that the banks are being negative about the whole property sector. Maybe Carillion is an exception and it would appear that their woes have been partly in the Middle East and maybe the blaming of Brexit uncertaintly is simply the usual current reflex. On the other hand this could also be a precursor of some difficult times ahead for what is always a volatile sector

The Networking tribes

Many of us have to Network on a regular basis. Its a mixed experience at times and fortunately less vital to my business than was the case some years back. Keeping networking fresh is important because the novelty of those early days of freedom and independence will certainly wear off. A sense of humour is required because there are times when certain people you meet can, to put it kindly,  test the patience

Here are a few you may recognise

The Gusher. They will tell you your business is “wonderful” and there is “so much we can  do together” and we “must meet”. Emails unanswered and calls not returned. You never hear from them again

Lonely old men with drink problems. At every networking event with an emphasis on booze. The evening or even lunch, takes its toll and you avoid at all costs. You never really work out what they do because they want to talk football or rugby, which is not the reason you are there of course.

The Scyther. Out of the office representing a high street bank or similar. They dont want to talk business or exchange cards. They just want to get out of their hellish pressure cooker environment and they remind you why you went independent

The Fantasist. They are always on the cusp of a major deal usually involving Russians or Africa. You can never quite work out what the hell it is they are actually completing and two years on its the story remains the same.

The Non reactive bore. They pin you in the corner and despite every bit of body language you emply to indicate you badly need to escape, the continue to drone on with usually a story whereby they came out as the hero.