No Co operation with Co ops

I recently had the pleasure of arranging finance for a 120 year old £20m turnover Welsh Farming Co op. We secured a line of £850k on top of a similar level of lending they have from a high street bank and a proposal for around £500k from a very conservative independent

Meeting and dealing with the client was a pleasure. Engaging and very professional. As rewarding as any client I have dealt with in recent years. So what could go wrong?

To initially facilitate the lending, they required a short term loan of around £70k. We are talking weeks rather than months and speed rather than price was the key. The obvious home for this was one of the myriad new PTP independent lenders. Should be easy.

Well it wasnt. The answer off just about every single lender in the market (and I approached at least a dozen) was “we dont finance Co ops”

No matter that it was a small amount to a business with a net worth a £5m and 120 years trading history.

The “new” lenders in the market like to pretend that they are somehow radically different and less risk adverse. They are not. They are lazy.

This is tick box lending. An obsession with “director’s guarantees” (impossible to enforce most of the time) over-rode a near cast iron credit proposal.

If i had made such a negative decision in the real world of commercial credit management, I would rightly have been fired.

Fortunately the loan was not required and we moved on. The supposed new lenders are a welcome addition to the market but they need to improve their underwriting. This is far from the first example of baffling decision making I have encountered and whilst I am at the front of the queue when it comes to slamming the big banks, their understanding of credit is still superior

 

 

FRC admits that auditing has failed

ICAEW is always a useful news source and this latest piece on the FRC and the standard of audits is revealing. As you may expect, it is a rather dry read but these paragraphs should be of interest

He also said that firms should stop referring to the company being audited as the “client” since it is the investors who are actually the clients. This would be a “small but important” change that gets to the “heart of the culture”, he added. McGhee agreed, adding that more transparency is also needed. 

Haddrill suggested that a wider range of penalties should be available to the regulator, not just heavier fines. He cited the ability of regulators in some regions to ban firms from taking on new clients in a particular sector as “worth considering”. McGee said that any punishment should be reflective of firm size. 

Could be argued that he should perhaps have mentioned creditors as well as investors but the heart is in right place

As for the penalties, surely that is just a little bit lightweight? Does anyone believe tsuch proopsals are going to make a fundamental difference and frankly its genuine fear of the consequences of incompetence that should be driving the sector to actual efficiency

The ugly side of administration

 

You may think that the accountancy “profession” at the higher level would have some sense of self awareness aware following recent events but of course we know that that isn’t going to be the case.

This story perfectly illustrates the prevalent small mindedness. Quite a potent mix with the previous incompetence of the auditors.

Of course there will be plenty who will defend the administrators line that all redudancy and back payments should be dumped on the Government but perhaps some reading through the piece might like to consider its yet another example of the growing disconnect between the haves and have nots? And where will that end?

If we are to have a thriving free market economy then its essential that all participants are shown respect. Whether its the rules in place or the dreary attitude of the administrators is not the point. Something is broken here.