No funds for SMEs?

A fairly strong opinion piece from the always readable City AM paper. I think many would agree with the sentiments although this could also appear to be something of a puff piece for “alternative providers”.

My concerns are two fold. It has become very clear that the larger banks are becoming less and less interested in SME’s. One in particular has more or less publicly withdrawn from much of that market whereas another is rather more subtly freezing clients out.  Now it could be argued that this is very good news for brokers like myself and I will not deny that it has sent some business my way.  More importantly though,  its not great for the overall economy, which is a little more important than my commissions

The second concern is that whilst the PTP lenders are quick and responsive, the rates are many multiples of the standard bank or EFG loan. What isnt mentioned in this article is that many simply will not take this route because of the cost.

SME’s need the best of both worlds and at present thats not clearly available. Quick responsive personal service allied to a rate which is manageable.

This is the real gap in the market

Algorithms? A step too far?

Today a very decent peer to peer lender was asked by a client of mine (via myself) to give an approximate indication of the likely terms before they went through the process of application (always a drag). The band width of the monthly interest rates quoted vared between 1% and 2.4%. That is huge.

The response was that they would only quote the rate once the application was submitted and approved. That might not bother a lot of borrowers but it does have an element of chicken and egg for others. I can understand that

That in some ways wasnt the greatest concern I had because this lender had made a firm offer to another very similar client of mine with a much shorter track record and less strong balance sheet,  of 1.6%. My question was, why couldnt that be used as a benchmark ?

I got the answer that it was all down to “algorithms”. This isnt good enough.

Firstly an underwriter should be able to get out from under the spreadsheet and give a considered view. If all he does is number crunch then he or she is redundant. Or should be made so

Secondly it was clear that the underwriter was not taking any time to explore my clients business and taking factors other than pure numbers into the equation. This is an increasing trend and a naive one. Without going into details my client had some excpetional positives which are clearly verifiable but were not illustrated by bank statements and the past balance sheet

The lender is now likely to lose the business.

 

 

Steve Jobs. How true is this?

Brokers and lenders. How is this acceptable?

Aldermore, the specialist bank, has announced the acquisition of a 48% minority equity stake in AFS Group Holdings Limited (AFS), one of the largest introducers to asset and commercial finance funders in the UK.

I have no problems at all with Aldermore as a lender and have some very good contacts there. They are reputable.

So why are they involved in aquiring stakes in brokers? We have seen these relationships before and they clearly raise questions the most obvious of which is how on earth can a broker be “independent” when its nearly 50% owned by a lender?

The simple fact is that they cannot. And if they are not then they are certainly not acting in the borrowers best interest. That can only work when the broker can demonstrate absolutely no favouritism or direct connection with any particular lender.

The problem with arrangements such as these is that it is simply inviting scrutiny from bodies such as the FSA.

My view on this is that “brokers” should be obliged to clearly state their ownership structure and put an end to this nonsense

 

The top “cashless” countries. And where does the UK stand?

Here is the list

The results may or may not surprise?

Amazon and Apple at war with the EU

This is about more than just the tax owed by these two giants. The significance here is this…

Amazon has been ordered to repay €250m (£221m; $293m) in back taxes after the European Commission said it had been given an unfair tax deal in Luxembourg.
The Commission also plans to take Ireland to court over its failure to collect €13bn of back taxes from Apple.

A significant and overdue change of direction by the EU and a welcome one too. The very  existence of corporate tax havens within the EU is quite ridiculous, especially when one of those states had to be bailed out of its economic mismanagement.

The UK is of course leaving the EU and can now set whatever tax rate it wishes. However within  the EU there should remain some freedom (although arguably the monetary union cannot fully function unless there is fiscal union) but surely within certain bands. Effectively allowing major corportaions to pay virtually no tax at all was absurd. Luxembourg and Ireland should have adddressed this a long time ago and deserve to be punished

 

No cheques here

Last week I experienced probably the most bizarre query I have received from a lender’s underwriter

The lender is a new player in the market and they could perhaps be excused some greenness. They have a very decent product whch theortically fills a gap between straight loans and invoice financing. They were up against two other lenders offers to win a prospect of mine

The problem they had was when the examined my client’s bank statements. This followed

I put the application into credit committee yesterday. They wanted to understand why XXXXX are being paid using cheques when the organisations that pay them are turning over hundreds of millions a year (xxxx, xxxx, xxxxx, xxxx, etc.). They are slightly uneasy that is just not in line with the rest of the market.

Please can you provide some clarity into the reasoning? Thank you very much.

Words failed me. Its not enough that my client is paid but its how they are paid. Apparently

They wanted some “clarity”.

I gave them a very clear answer

 

Collapse of Monarch

Monarch was the very first airline I flew on and I would suspect that that is true of many from my generation, so its sad news today that the airline has collapsed. I am sure that many would also be sad that it was Monarch and not a certain other airline that is very much in the current news.

Airlines have always been notorious credit risks. For many years airlines in the US seemed to spend half of their time in Chapter 11 and in europe we have seen many collapses including national airlines such as Sabena and Swiss air

The reasons for the high risk are manifold but tight margins and shifting patterns of consumer appetite are key factors. The reality here was that Monarch were very much tied in with a the fading world of the package holiday and were very vulnerable to competitors in a world of cheap flights and consumers organising their own “packages” online.

A key but underrated factor in all credit assessment is the debtors place in its market. This is not illustrated by balance sheets or fashionable algorithums (although a trend cross P and L and balance sheets is a possible indicator) but is about knowing the client and exactly where they stand and what their future is likely to be.