Building firm in administration - and blaming RBS

dopester

Alan_M wrote: »

I own a business, I'm confident enough about my business that I put the family home on the line and secured our lending against it.

Things have been tough but we've traded through and business has picked up dramatically in the last month. We now need to restock...the problem there is our overdraft is being called in.....

The reason it's being called in is the drop in value of property. My bank LloydsTSB now don't consider my house as enough security to cover the lending (which they are now calculating at 50% of current value less mortgage) so they want their overdraft back.

It has happened many a time in previous recessions too. You're a trade supplier of granite kitchen and bathroom worktops if I recall correctly.

You're confident about the business, and secured business funding against the family home - (not something I'd ever do myself but not against those who want to accept that risk).

House prices are crashing so they want to call the overdraft in. The bank's position seems sensible to me, blunt as that may be.

Did your confidence assume the lenders wouldn't pull your overdraft in these times?

I thought everyone knew lenders apply the squeeze in a downturn and in recessions. You sound like you expected a bank to see things from your point-of-view and keep the facilities open for you during rough times - when their security for the money is on the line.

Decadent_Fool

I work for one of Wrekin's clients, and while I obviously would hate the thought of people losing their jobs, there have been LOADS of CCJ's against Wrekin recently, and subbies haven't been paid - one to the tune of over £1 million. They turned up on the clients site ready to take their kit back even though we had paid Wrekin in full. Wrekin were just plain and simply keeping the monies back for themselves.

I really feel for the employees, but there's a lot of bad management practices we've witnessed over the last 9 months that ensured they would never work for our organisation again. Perhaps, if Wrekin had managed themselves better, the bank would have seen them as a more viable option.

dopester

Decadent_Fool wrote: »

I work for one of Wrekin's clients, and while I obviously would hate the thought of people losing their jobs, there have been LOADS of CCJ's against Wrekin recently, and subbies haven't been paid - one to the tune of over £1 million. They turned up on the clients site ready to take their kit back.

Perhaps, if Wrekin had managed themselves better, the bank would have seen them as a more viable option.

It is really tough on other well-run companies and sub-contractors they owe. I hope they are able to get paid what they are owed.

As a student I worked for Alfred McAlpine one summer, and then for Amec another summer. I can't join the parade here who may believe companies with big order-books are somehow automatic worthy causes to have more money extended to them - when we're unable to scratch deeper in to all the finer points of the company.

We can hope the employees of Wrekin can find work at other companies in the sector or whatever comes out of the administration.

It is understood that Wrekin’s problems stemmed from its suppliers putting pressure on the company to pay its bills. An RBS spokesman said: “We have worked with the Wrekin Group to help them resolve their financial difficulties.

"We have given very careful consideration to their situation and regrettably concluded that the business was unsustainable due to the extent of creditor pressure. We take no decision like this lightly.”

Alan_M_2

nykmedia wrote: »

Let's be brutally honest here, is a business technically 100% 'solvent' if it's trading is reliant on the bank's money? It's a bit like saying you're debt free and then using a mortgage to buy a house - the house is never yours until it's paid for in full.

Debt free and solvent are two very different discussion and are not the same.

If we used the black and white version you're suggesting all the banks would have ceased trading and UK Plc would now be bankrupt......turn the lights off, lock the door as you leave.

My problem with LloydsTSB is moving the goal posts with regards to lending criteria (i.e. lending equity)....

Credit lines are a necessity for any manufacturing or stock business without them we simply cease to operate.

Alan_M_2

dopester wrote: »

Did your confidence assume the lenders wouldn't pull your overdraft in these times?

I thought everyone knew lenders apply the squeeze in a downturn and in recessions. You sound like you expected a bank to see things from your point-of-view and keep the facilities open for you during rough times - when their security for the money is on the line.

Hmmm, you're suggesting I should have predicted the economic situation we now find ourselves in.....Lets say I did...what do you suggest we should have done to prepare ourselves?

My frustration with Lloyds is moving the goal posts....

My assumption was my bank would leave the lending in place whilst plenty of equity existed to cover it and we operated within our account parameters.

There is plenty of equity available (I have a 30% mortgage LTV) however LloydsTSB change the parameters of how they calculate "lending equity" from 75% of house value less outstanding loans to 50% of house value less outstanding loans based on their guess of what the value is now.....

They have changed the parameters of our original agreement.

Frugaldom

Alan_M wrote: »

Debt free and solvent are two very different discussion and are not the same.

If we used the black and white version you're suggesting all the banks would have ceased trading and UK Plc would now be bankrupt......turn the lights off, lock the door as you leave.

My post didn't state that debt free was the same as solvent, but my understanding of solvency is that a business (or individual or financial institution) can cover all outstanding debts when they become due and that those debts could become due at any time. If the companies (or individuals) cannot sustain, let alone repay, their [strike]debts[/strike] borrowings when recalled then they are not, in my opinion, solvent.

My comparison was loosely between a homeowner calling themselves a homeowner when their home is partially owned by a lender and a business calling itself solvent when it clearly cannot liquidate sufficient assets at any given time to meet its [strike]debts[/strike] borrowings when recalled.

Generali

Alan_M wrote: »

Hmmm, you're suggesting I should have predicted the economic situation we now find ourselves in.....Lets say I did...what do you suggest we should have done to prepare ourselves?

My frustration with Lloyds is moving the goal posts....

My assumption was my bank would leave the lending in place whilst plenty of equity existed to cover it and we operated within our account parameters.

There is plenty of equity available (I have a 30% mortgage LTV) however LloydsTSB change the parameters of how they calculate "lending equity" from 75% of house value less outstanding loans to 50% of house value less outstanding loans based on their guess of what the value is now.....

They have changed the parameters of our original agreement.

This is exactly what happened in the early 90s - small businesses reliant on overdraft funding had that funding withdrawn with little or no notice. Most small businesses in the UK AIUI rely on overdraft funding.

IIRC, Labour in opposition declared they were going to Do Something about that by getting banks to provide loans rather than overdrafts to small businesses. Of course once the last recession was over and everyone forgot about the funding problem, they dropped the whole thing.

Is there another bank that will provide funding to you? HSBC perhaps as they are in good shape. Alternatively get your MP and the local rag involved, perhaps some negative publicity can get something done.

dopester

Alan_M wrote: »

Hmmm, you're suggesting I should have predicted the economic situation we now find ourselves in.....Lets say I did...what do you suggest we should have done to prepare ourselves?

That isn't for me to answer for your situation. You know your business plan and your own projected outlook better than I. I'm not intending to stir Alan, but just giving my cold thoughts about lending in the new world.

Prepare though? For me it is go we interpret what is going on in the world. What we choose to do. Decisions and the actions we take. I've made my own hard choices which have come at some personal cost, but which sees me well positioned now.

If I'd had an alternative outlook and taken a different decision in recent years to buy a house, it could have seen me now in a very difficult position, and maybe the Frain family would have been hard hit if they hadn't sold Wrekin after 40 odd years of family ownership to someone with big enthusiasm for the future in 2007.

I'm totally shielded against accusations that I'm cold and out of line with house prices still at insane levels, and generally totally out of whack with economic reality.

dopester

Written well before the banks totally got seduced in to believing it was all boom and no bust forever-more, and relaxing lending to borrowers in all types of business and in the residential property market.

Beware Of Smiling Bank Managers Bearing Gifts

The biggest whinges I get are from people who say that their banks won't lend them money, and the second biggest is the story of what the bank did to them when they went bust.

People joke that a bank is a company that lends umbrellas when it's not raining. There is some truth, perhaps, in that, but to be fair, if it was my business to lend umbrellas I wouldn't lend one to a person plunging over a cliff in flames. OK, it may slow the descent a little, but it only marginally delays the inevitable, and I would have lost my umbrella which is my business.

If the banks won't lend you money, are they mean, cruel and jealous of your success or are they too stupid to see the brilliance of your cunning plans? Look, I am not over-fond of banks myself, but they should be looked upon as a kind of neutral. Bear in mind that they are in business to make money by lending more. Rest assured, if they thought you were certain to succeed they would rush to lend. Of course the irony is that they can only really be sure after you succeed. Then they want to lend you more money. Hence the umbrella story.

If we can digress for just a moment, there is quite a sinister threat lurking here for you. As we said early on, we get all bitter and resentful when the bank is `too stupid' to lend us money, but the opposite can happen. You can make a huge success of things and the bank tells you that you are a genius. What perceptive, clever people they are to have spotted that certain truth, therefore they must be right about everything else.

From the bank's point of view, they see you as a good bet, but be warned: they have a strange way of working this out. They don't judge you on the warm relationship they have built up with you because you are a good and special human being. They do it through a formula and statistics, the sort of formula that calculates a ball bounces forever because it did the last 23 times.

Now listen, you have made a few quid, you have now proved that you are probably brighter than the people at the bank. After all, if they were so darn clever, they wouldn't be working at the bank but would be out with you, making their own way in the world. You believed this when they turned you down, so why not believe it now?

They will want to lend money to you at an inappropriate time. You will see over the next few chapters that the secret of success is being able to sell yourself to the right people. Don't you think that the banks know this? If they think you are a good bet, they want to `sell' you money. The clever bit about selling is that the seller decides when the intended victim will buy, and the subtle thing about buying is buying exactly when you want to. Just because they say you are a genius has not improved their business acumen, and if you let them suck you in, you could be making fatal mistakes.

A Cautionary Tale

Go It Alone
The Streetwise Secrets Of Self-Employment
Geoff Burch

dopester

Generali wrote: »

Alternatively get your MP and the local rag involved, perhaps some negative publicity can get something done.

Maybe not if it's with a M.E.N run local rag involved, and I suspect many around the country are under similar operational pressures. The only journo I know has a 2005 BTL "investment" as well as a family home.

Manchester Evening News publisher cuts 150 jobs
Comments (33)

* Ben Dowell
* guardian.co.uk, Tuesday 10 March 2009

MEN Media, the publisher of the Manchester Evening News and 22 weeklies based in the north west, is closing all editorial offices of its weekly newspapers and axing 150 jobs.

A joint statement from the MEN and the weekly titles' chapels said: "There is some hard talking to do now. We cannot stomach a pay freeze for the masses alongside bonuses for the top table.

We anticipate real, practical difficulties producing our weekly newspapers alongside the MEN. We fear for local democracy and for the damage to regional journalism."We are also completely opposed to compulsory redundancies and will not tolerate the sacking of any journalist. Management needs to understand that. They need to talk to us quickly and constructively about how we can avoid compulsory job losses. If they don't, we are in for a torrid time."

The decision has been condemned by the Guardian and Observer chapels.

A statement from MEN parent company GMG Regional Media said that fewer free copies of the MEN and weekly titles would be distributed and the Manchester Evening News would have its pagination reduced.

The GMG Regional Media chief executive, Mark Dodson, said: "MEN Media's role is to produce great journalism for our readers, users and viewers in Greater Manchester. If we want to continue to be able to do this, we need to find a new, sustainable, lower-cost business model to support it. The economic viability of local and regional newspapers is under very real and imminent threat.

http://www.guardian.co.uk/media/2009/mar/10/manchester-evening-news-publisher-job-cuts

MEN staff 'devastated' by job cuts announcements, says NUJ chapel
http://www.journalism.co.uk/2/articles/533756.php