Business Finance | Banks can't do it anymore!

Business Finance | Banks can't do it anymore

There was a time when the sensible way for a respectable business to finance the ups and downs of their developing cash flow requirements was to trip down the bank with their figures and see a friendly Bank Manager who knew them, understood their business and had the discretion to assist them sensibly and proportionately with an overdraft.

There were rules about this. With a long climb up the specialist ladder behind him (mostly a him) he knew how to assess the risk and how to apply the brake when required through monitoring, understanding and sensible appreciation of what the customer was trying to do. To read the full article from Bob Shepherd of Bob Shepherd Associates, click the link.  Simple really

Business Finance | Bank's can't do it anymore

Business Finance | Banks can't do it anymore

There was a time when the sensible way for a respectable small business to finance the ups and downs of their developing cash flow requirements was to trip down the bank with their figures and see a friendly Bank Manager who knew them, understood their business and had the discretion to assist them sensibly and proportionately with an overdraft.

There were rules about this. With a long climb up the specialist ladder behind him (mostly a him) he knew how to assess the risk and how to apply the brake when required through monitoring, understanding and sensible appreciation of what the customer was trying to do.

And then the system changed.  To read the full LinkedIn article, click here.

Those Business Plans

There is a lot of nonsense out there calling itself a business plan. I see them regularly and I have come to the conclusion that many people, for a variety of reasons do not appreciate the power and reach of a proper business plan. 

In an effort to get people involved, various organisations have come up with templates and examples over the years, a lot of which, frankly, say more about their standards of understanding than they do about any business.

The result is that the whole reason for having a business plan is clouded by the dreadful examples that get passed around and in the end contribute to the pile of nonsense and lack of understanding that sparked off these templates in the first place! 

I have also seen the professionals who seem prepared to accept business plans that actually are a dis-service for the subject business. These are plans that have basic flaws in the business model. Others that have dysfunctional inconsistencies in the presentation and some others again that are predicated on complete misapprehensions of say, the abilty of the business to raise finance. 

The poor prospective small business owner (who may quite reasonably have no experience or knowledge in the background requirements of his business) is sometimes led up the path for weeks or months unaware that his business has no hope of success in its present guise.

I cannot stop all this. What I can do is ensure that Bob Shepherd Associates is party to practical, ethical and realistic plans. Our plans will always have integrity. They may be dressed properly for the occasion but will never be "written for the file" as I call it.  

Going back to some of the rubbish I have seen, while our plans may be dressed I would not be seen out in some of the outfits I have seen done by others!

'Pub Talk'

Banks get a mixed press and I for one have been very disappointed in a number of things I have seen with my clients in recent months. However sometimes the bank is justified in its view. I was once called upon by an SME to advise them because their bank was suddenly taking away their £65k trading overdraft.

The reality was that they had had a £25k overdraft which had been increased after consultation to £65k for a 3 month period to cover the circumstances. That 3 months had expired and an extension had been granted to cover some further crisis and so on. 6 months after the first expiry the bank was saying 'this can't go on, we want to revert to £25k at the end of the month'. Not unreasonable when you examine the case and quite different from what I was told initially.

By producing information, preparing forecasts and approaching the bank properly Bob Shepherd Associates managed to get the £65k retained as their normal overdraft. While I was at it I noticed the company's leasing arrangements for equipment were all over the place and I re-sheduled that lending creating £4k extra cash per month in the business.

I call it 'pub talk' where an ill informed half story gains currency. Banks are wide open to it all the time and often cannot answer without breaking confidentiality.

Economics? What's That?

To paraphrase a well know advertising campaign 'I thought Mackro was a cash and carry until I discovered Economics!'  That's a finance world joke that is sort of funny. It refers to macro economics which is about the big strategic stuff rather than micro economics which is the homely detail.
There was an event at the new university building in Newport this week put on by a major Bank to give the business world a briefing. I expected a summary of where we are with things, some guidance to the cutting edge thinking of the moment, some tips on areas for special interest and a command of the whole thing better than my own.
Business Finance Guidance
I also thought we have guidance on what this major organ of the UK financial world was doing to contribute. They had a go at that. We had a specialist - a well qualified economist flown down specially from the bank's Head Office to disseminate vital information to the grass roots. But when a question along those lines came up he handed back to the local regional Director.
We had a good summary of the current economic trends and thinking, but no better than I get by listening to Radio 4 and the BBC News.
In short we had a summary of UK economics with nothing innovative to add. There are no inside tips. The bank's central economics unit has no real interest in what the bank is actually doing for its local region it would seem.
Project Merlin - Bank Lending to Small Business
Some figures were given that showed the bank is lending more than anyone else under 'Project Merlin' - the government's initiative to have them lend more to small business. Might be right; not convinced.
Still we all had a nice lunch with a beautiful chocolate dessert. I forgot to note who the caterers were. We also saw the inside of the new Uni building, which is impressive. There was always the chance of bumping into someone useful, as with any networking event. It was good.