The Banks are gambling with our money at the races, analysing your racing form and only placing bets if they feel you have a strong chance of coming home amongst the top runners.
Whilst money was in good supply the Banks took a positive view on Risk and had few issues providing loans. Now cash is limited the Banks have had to create new lending criteria. As a business you are no longer being judged on your own Business’s performance, or your ability to service your debt, you are being judged against the competition.
I spoke to a Company recently have a loan of £200m I asked how they were being treated by the Bank and was told that the Bank loved them. You see the first £20m from their profits, in fact nearly all the profit, pays the interest on the debt. However, this love relationship will only lasts as long as they service the debt, if they fail to pay the interest on the loan - they change from being an asset to a liability and the Bank will call time on the loan, and place their bet elsewhere.
Where do I go from here?
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Recent research has shown that in 72% of occasions Fund Managers charging about 2% fail to beat the market. So if the 'experts' fail to back the winner in the majority of cases isn't it about time you took an active interest in managing the Cash in your business?