It’s my observation that many banks are currently trying to take the high moral ground with Mr and Mrs Small Business Owner and continue to make things tough for them.
For instance, in talking with many business owners over recent months it is clear that a common thread is that business owners are finding that it is tougher to get access to finance than it was before the global financial crisis (GFC).
So what, you ask? I mean, Paul, what did you expect.
To be frank, I did not expect anything from banks. I mean it’s now understood that bankers as a group were instrumental in causing the GFC through the games they played with the derivatives market and the dubious lending practices characterised by what we now refer to as the sub-prime mortgage crisis.
Yet, right throughout and subsequent to the GFC, we hear of how Wall St bankers essentially held the US government (and other governments around the world) to ransom by requiring that they be “bailed out” of their difficulties because the US and world economy could not afford a financial meltdown.
Now, while that’s certainly true that the world can certainly do without a full-scale financial meltdown, (and many countries such as Greece, Spain and Ireland among others are not out of the woods yet), what I find appalling is that the banks (aka banksters) seem to want their cake and eat it too.
Yes sir. The so-called financial experts can cause distress across the globe the likes of which has rarely been seen before and then brazenly ask to be bailed out by governments and at the same time continue to pressure the mum and dads and small business owners when they experience cash flow difficulties and the like.
This is VERY hypocritical in my view. And it’s not only overseas that we see banks taking a tough line.
Right here in the land of Oz we see companies across all industries facing challenges in accessing financing from the banks.
Whether it’s for:
• Rollovers of construction or development loans
• Financing of new franchisees
• Equipment financing
• Refinancing of interest-only loans etc
the story is the same.
Costs have gone up, banks are making many people jump through more hoops and are taking longer to make decisions and, even when they agree to a loan, we have heard of cases where they do not settle loans on the agreed settlement date. (In the interests of not naming the offending bank we are determined to not say which bank is involved.)
My contacts in the mortgage broking industry have confirmed this with many having horror stories to tell of their dealings with banks. Paul, I am still not clear on what your issue is?
Well, while I understand that banks have higher funding costs it is not in anyone’s interests that they take a heavy hand with mum and dad or small/medium business clients that are weathering the ongoing economic storm.
But Paul surely the banks have a right to protect their interests? I agree, they do. However let’s not forget that they are dealing with real people and their lives. Surely the focus should be to help clients get through their difficulties and come out the other side if at all possible.
Banks will likely say they are doing this.
But if we ask those that are affected I dare say the picture that emerges will be different.
In Australia the banks are fortunate in that our mortgage contracts still convey liability for monies owed in the event of a repossession and a house is sold below the value of the outstanding mortgage. That is, the borrowers are still liable for any shortfall even after the house has been repossessed and sold.
This situation has led to all sorts of games being played and sweetheart deals happening with mortgagee in possession sales. (If you don’t believe me go and talk to a long timer in the real estate business, have a coffee and see what tumbles out.)
Now the situation would be very different if our mortgage lending laws were like the USA, where it is lawful for home owners to “walk away from their mortgage” and leave the keys in the mail box (or with the bank) aka “jingle mail.” Hmmm … one can only imagine the scene here if that were possible.
Then, of course, we have not even considered super funds and their lack lustre performance in recent years. Many of you have either lost a small fortune or know someone who has due to their “expert advice” going awry, yet they keep paying themselves for administering your account. Certainly, the world has gone mad when we continue to enable anyone to be paid for miserable performance.
(Yes, I know there have recently been some changes to the super funds and their administration, and it’s great that there have been some reforms. It is not my intention to comment on specifics but just to make a general comment about the overall picture. I will leave a more scholarly treatise on the particular reforms to others in other forums. That said, I can only wonder how differently fund managers would make their decisions IF they had to underwrite and guarantee the capital that was originally invested within, say, a margin of plus or minus 5%. After all, they ARE the experts AND they ARE being paid handsomely regardless of whether your net worth improves … )
Finally then, we come to the matter of those nasty exception fees that the banks have charged for years and years. You know the ones, the late payment fees, bank overdraft fees, dishonour fees etc that are out of total proportion to the actual cost incurred by the banks. At last some of the banks are now heavily marketing that they have removed this or that fee. Well is about time. And there’s still a way to go in my view.
Anyway if you would like to join a legal action against a number of the banks to recover exception fees you have been charged over the last six years, check out this web site now.
http://www.financialredress.com.au/
Don’t delay, as they are about to close off registrations to join this action. It’s a simple 3-step process you can do online and it’s on the basis of “No Win No Pay.” To find out more go to the web site and do yourself a favour -recover at least some of what was taken from you.
Further, in the words of Martin Luther, I have a dream of a world where there are no banks, no debt, no interest charges… OK, for many of you that’s too far out; you can’t even imagine getting by without your regular dosage of retail therapy and use of your credit card. If that’s so, then at least make sure you pay it off in FULL each month so that you do not get stuck in the cycle of debt of high interest charges.
Finally, as a last comment I want to encourage you to think deeply about the positioning of your business in the market place right now. Are you well positioned regardless of what may happen in the future. What if there is another dip in the economic cycle – how will your business cope? What if there is significant demand growth in your industry? Are you positioned well to take advantage of it?
Each of these scenarios has their own challenges. I strongly suggest you think deeply about how and what you would do to protect you, your business and your family. I encourage you NOT to just go along as you always have. And, of course, if you need a helping hand we’d be glad to help. | 
