Panorama - Credit where credit is due.

michaels

Alan_M wrote: »

The security question is a bone of contention.

They already have our house, it's that, that has actually become the issue.....

LloydsTSB have calculated that there's a significant risk of the housing market falling to such a level that in their words "There is no lending value in the property" (mortgage currently 50% LTV). Therefore our current lending which is secured against said property is no longer secured and we'd like it all back please.

Now we apply for an EFG loan, it's being suggested (I've yet to have this in writing for obvious reasons) that as we have equity in the property available we can secure the loan against that....therefore we don't qualify for the EFG scheme (same bank by the way).

You really couldn't make it up...

Count me in for 10k if you get the contracts drawn up with decent security

Alan_M_2

You couldn't make it up.....we also suggested as we're holding more stock that the value of our existing facilites (which is all paid for and not on credit) that they could take a debenture and secure the lending in that manner.

LloydsTSB have decided that the value of our stock is 10% of cost price in a fire sale, therefore we have no stock value worth securing a debenture over...but as you mention it, thanks we'll take a debenture anyway.

The bank are constructively trying to close us, I really don't understand why. They aren't even intersted in us winding us down slowly and paying back the facilites, they actually seem to want us in administration.

My business manager, who always was able to make decisions for us pretty much there and then, has had all his decision power removed, everthing we ask for has to be referred. This is very recent.

It's a bizarre situation which makes no sense...we are a business with lending which has always operated within it's account parameters, we've never bounced a cheque, never missed a loan payment, paid back everything on time as requested yet LloydsTSB are so agressively pursuing their money back they simply want to shut us down. I still cannot see the value of this decision.

HelpWhereIcan

I recently applied to Lloyds TSB to extend my company's overdraft to help us exploit an opportunity for expansion we have got (funnily enough due to the credit crunch).

Normally I would not have thought twice about whether we would get it or not and would just give my Business Manager a call and ask her to arrange it.

However, remembering Alan's story and hearing some horror stories about the banks pulling the rug from under IFA businesses I thought it best if I went to see my Business Manager face to face to make a good impression.

Now the figure we were looking at was not big (20k) and has always been chicken feed by any company's standards and the banks have never had an issue with that sort of facility.

Talking to her I got the distinct impression that my Business Manager was not sure she could get it through.

"Well, that's a great opportunity (lucky you) and what you're asking for is reasonable and I have no issue supporting it in principle but I need you to get some figures to me. We'll then have to run a credit score and pass it up and ... you know"

She was obviously preparing me for the worst and not that sure she could get it through in the current climate.

However, fours days after I faxed the cashflow and P&L projections she called me to advise that

"I did a credit score and, of course, there was not an issue. I'll send you the new Director Guarantee form to sign and I'll get it put on your account as soon as we get that back.

You coould almost hear the smile on her face and I suspect from how pleased she sounded that I was one of the few people she was giving good news to that day.

Other than the amount being small which was an obvious advantage, I can only think that the positive side of the application that even my Business Manager understimated was the fact that the money was needed to fund expansion (we could continue as is with no funding).

Main point is that even my Business Manager seemed surprised so I suspect that they are frustrated used to giving mainly bad news in the SME market at the mo.

Alan_M_2

Nice to hear there's some good news and some lending about.

We've submitted a P&L statement and projections to a few banks, we're waiting to hear if any are interested.

Our immediate problem is we're pigeon holed as suppliers to "The consturction Industry" and no matter how good our figures or forecast is, that sends many running before they've even opened the first page.

HSBC said no, simply on the grounds of the industry...waiting to hear from the others. (The HSBC guy did offer comment that He simply couldn't understand LloydsTSB's stance with us considering our track record, it simply doesn't make sense....nice to know I'm not going mad and it's not just me then).

Fingers crossed, one of them will take an interest. The knockbacks are getting demoralising, I've turned away £100,000 worth of business this week simply because I can't finance it. I'm beyond the angry stage and have a resigned feeling of inevitability......

It's a very strange feeling going to work every day and not feeling in control of my own business.

We can just keep trying. The most difficult thing is expalining to my customers that I can't guarantee any supply beyond our current stock, they can't understand why we have orders and are not able to supply......but if we can't finance the stock it's all rather arbitary.

lynzpower

Alan

Whos your MP, have you let them know? This sounds like the exact sort of thing they should know about?

Radiantsoul

Alan_M wrote: »

You couldn't make it up.....we also suggested as we're holding more stock that the value of our existing facilites (which is all paid for and not on credit) that they could take a debenture and secure the lending in that manner.

LloydsTSB have decided that the value of our stock is 10% of cost price in a fire sale, therefore we have no stock value worth securing a debenture over...but as you mention it, thanks we'll take a debenture anyway.

The bank are constructively trying to close us, I really don't understand why. They aren't even intersted in us winding us down slowly and paying back the facilites, they actually seem to want us in administration.

My business manager, who always was able to make decisions for us pretty much there and then, has had all his decision power removed, everthing we ask for has to be referred. This is very recent.

It's a bizarre situation which makes no sense...we are a business with lending which has always operated within it's account parameters, we've never bounced a cheque, never missed a loan payment, paid back everything on time as requested yet LloydsTSB are so agressively pursuing their money back they simply want to shut us down. I still cannot see the value of this decision.

The bank presumably feel that you have few assets of any value and little liquidity. It may be the case that your business is profitable, but it seems to me that part of the problem has been that banks have been adopting too much equity type investment compared to asset backed lending.

People always say banks only want to lend to you when you don't need it. But this isn't quite true. They only want to ensure they can be repaid.

wannasavemoney

If you have regular repeat business are there any companies that you deal with that know you well enough to possibly pay a certain percentage up front for their order? This may give you a little working capital or would this not be viable?

fc123

I can't offer anything constructive but wish you well.

During the 90's there were, supposedly, a lot of grants about for 'Mnaufacturing'. Our area (before they covered the brownfield sites in Domes and Legoland flats) was declared a priority area for SB in it.

What a waste of time. The only people who earnt from these grants were the service providers. The bloke who came to look (£30k pa), the admin asst who typed everything up (£20k pa) and the printers who printed the info for us etc etc.

I don't recall anyone ever getting anything but I knew a lot of companies who applied. These were council run schemes (not fake scam ones) and were a total waste of everyones time.


Once, only once, did I get a grant of £2k for machinery in E1 as I was manufacturing in the area (on a small scale) and that was only because I knew the person who was administering the scheme.....who was absolutely sure I was actually making things.
I had to give freebie lectures in return...but that was OK.

Alan_M_2

wannasavemoney wrote: »

If you have regular repeat business are there any companies that you deal with that know you well enough to possibly pay a certain percentage up front for their order? This may give you a little working capital or would this not be viable?

Here's the anomoly where we slip through the net, and this might actually make more sense if I explain this in a different way.

If I had 5 customers, and those 5 customers all buy the same thing each month in the same volume, they'd place standing orders with us and we could go to the bank and arrange finanace and it would all be terribly easy, mainly becasue the finance would be arranged in a way that our customer was actually responsible for any default and not us...hunkey dorey...this is what most people commonly know as stock finance.

We do have a lot of repeat business, we supply a reasonable number of small fitting and installation concerns that buy from us on a weekly/monthly basis.

The thing is, their orders are different every week, they don't know what they need to buy until the beginning of each week/month as their jobs come in. So they can't place an advanced order that we can go to the bank with and get finance.......

Think of us like a small version of a B&Q type business, we fill our shelves with goods (in our case granite) the size shape colour and variety of these granites vary.

Our customers take orders, then the same week come and buy what they need from us. No lead time, we have it in stock....if we don't stock it they go to one of our competitors and so on....

So we need a healthy stock level and healthy flow of stock in production (average lead time 3 months).

The more stock we hold and greater variety of colours and sizes we hold the more business and repeat custom we attract.......Our bank want these firm orders before we have the stock...which simply doesn't occur in this industry (due to the long lead time). We're in a little bit of a chicken and egg situation, the only way we can finance this is with our own cash and loans against equity.

We've done so and are operating fine...however due to the housing crash our equity has been eroded. Our bank are panicking and saying they want the loaned money back as they don't feel the equity exists any longer......however, this money is being recycled each time we want to purchase more stock.

So, it's left us in a position where we are now obliged to pay back our lending (in a very short period of time) which we can do, but we then can't buy stock.....so we close.

Or we buy stock but can't pay back our lending (in the required timescale)...so we close due to defaulting....

We refinance or we close, that's it.

What is frustrating is we have been a model customer paying every payment on the nose...so why do this?

To give an analogy to housing...Say you bought a house last year and it's in negative equity......you still have the ability to make the payments, it a home not an investment right....so as long as you pay then no problem.......

However, the bank decide actually they aren't comfortable with the situation, the assett on which their loan is secured is no longer worth what it was, so we'd like our money back please....now thanks.....even though you're making all the payments on time, as agreed. That's exactly what the bank are doing to our business.....the music has stopped and all the chairs are removed.

The difficulty I face now is I have to be very careful how I trade, I could very easily (unintentionally) end up trading whilst insolvent, which carries some pretty harsh penalties....so it;s in my interest (in the eyes of the law) to fold the business as soon as possible unless we refinanace.

I'm quite a pragmatic person, I will often look at a situation from the other side and ask myself if I were in that position would I make the same decision? No matter how many times I ask myself that question I simply see no upside ofr LloydsTSB in actively closing us...it makes no sense, unless they feel the only way they have of recouping their money is by forced closure and reposession before the values drop so far that houses aren't worth the sum of their component parts...I.e. a pile of bricks.

bubblesmoney

Alan M - i wish you all the best with the refinancing.

here are a few suggestions in case you have not explored these options already.

• write and speak to your MP. have all evidence needed to support your case at hand when you meet them.
• write to the opposition party in your area
• speak to your local councillors and mention about local business might have to close because of refinancing problems. have evidence at hand to explain in simple english as they might not be savvy in business finance issues
• write to labour party and opposition party bigwigs especially the ones looking after business and bank sectors. they usually have a named person for these sectors. again explain as above in detail. ask for their help.
• write to the select committee of parliament (the select committee which covers small businesses and also the one about banks etc) in detail about your problem. please remember that select committees DO NOT TRY TO RESOLVE individual issues but they might see the bigger picture and try to raise the issue in parliament and also start a select committee enquiry into small business financing problems. more important also write to the select committee members individually about these refinancing problems. usually MPs respond only to queries from their constituency. but clearly point out in your letter that you are requesting help from them even if outside their constituency as you are approaching them because they are select committee members which covers the small business and banking sectors. see parliament website for details of select committees and see who you need to contact.
• ask your MP to consider starting an early day motion on the issue of small business refinancing. discuss if this is a viable option considering your time scales
• write to the PMs office. you dont lose anything by writing, you could get lucky and someone with the right connections might pull some strings for you if the right people make some noises on your behalf supporting your case
• best of luck