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Bank Rejects’ Offer

 

When does the one syllable, four-letter words into minute-long sentences, yelled out in single syllable breaths monster surface?

Think about the last time you were on the receiving end of rejection.Finger

Did the ‘it’s- not- fair!’ Monster surface when you were reminded that the world’s not fair, and this time, it’s not fair in your favour?

Deserved and fair or undeserved and unfair, it’s an uncomfortable place to be, with an uncomfortable word placed hanging in the air: Reject.  A powerful word with disrespectful connotations that’s used in high places and, the considered term for those whose bank loan application is turned away: the rejects.  However, any bank rejects may feel slightly more comfortable about their tag when they hear about the proposed forcing for some banks to close the Billy-No-Mates zone and offer their cast-offs to other lenders.

Can you go forcing something if it’s just not right?

Mothership
Apparently ‘tis so, the plans have been confirmed. The Treasury is drawing up their strategy in preparation for legislation and announcements during the Autumn (sometime when leaves are on the line, hay fever has turned to flu, blankets are being brought out because there’s a reluctance to put the heating on, and an Autumn Statement is due).

I can’t even begin to guess how many business groups and trade associations are linked with recent business statistics that show there are 4.9 million UK businesses, of which 4.7 million are categorised with micro status and  (though some are incorporated for deposits) there are somewhere in the region of 181 ‘banks’ (not including Building Societies) listed as active in the UK by the Bank of England. From amongst all those glorious numbers there were a magnificent ‘over 45 responses’ (I’m not certain whether ‘over’ means 46 or whether somebody decided 45 was enough before it was time to put the kettle on) rallying to the call from the consultation, to answer questions on  ‘help to match SMEs rejected for finance with alternative lenders’. WatchOut2

Sounding remarkably similar to the processing of victims in stocks (although it’s an image that might work for some, that would be the wooden pillory variety not the trading type) the proposed linking to ‘alternative lending opportunities’ suggests, for the mandatory process, ‘SME’s will be forwarded on to platforms’, whenceforth by their visibility, be sped to open market (I added that bit).  Similar to how some banks already operate (i.e. Santander and Funding Circle), ‘rejects’ will be asked if their details can be shared on Government designated private sector platforms for exposure to those who have an interest in staking their claim for a lending opportunity.

It wouldn’t surprise me if the mandate wants a `Guide for the Innocent’ creating which would be placed at various points of the youthful open spaces that have replaced privacy discussion areas in banks; no applicant will be left unturned and no applicant will be deemed capable of understanding why (notwithstanding unfavourable times) their business might be viewed by a particular lender as unfavourable. The leaflet’s headings likely something along the lines of How to improve your Chances for a Successful Application, Prepare your Business Plan, Know your Numbers, to a final If Your Application Fails. Then, more Disney than Dragon a simple statement ‘don’t worry, somebody will want you – ubiquitous smiley face’. 

Smiley
Finishing with:  If Your Application Fails:  OK, expect to see the taxi with no brakes waiting, not certain how much fuel will be in the tank. Destination? How should we know?  We want to close the door ASAP, you’re an unwanted guest. No guarantees but, if you’re lucky someone will pick you up, to cosy up over the spreadsheets, won’t (but maybe should) happen.

Despite HM Queen Elizabeth II stating (4 June 2014) ‘The Bill (Enterprise and Employment Bill 2014-2015) will support small businesses by cutting bureaucracy and enabling them to access finance” I humbly ask (not wishing to spend any time in those stocks), am I alone in an ever sceptical viewpoint?

Any bank, with new goals of bigger fish, being forced to share data with other parties about an applicant they deem a reject will definitely cut bureaucracy. But, (and this is the big but, possibly with a double T) to manage a referral system that treats all applicants equally, that is mindful of them falling down open gaps left over from perceptions of ‘non-quality’ custom, that ensures the Guide for the Innocent has all the lines in between read, that clears the applicant’s path of stumbling blocks to avoid a missed opportunity, means managing the difference of enabling them to access finance and enabling finance to access them.

Businesses (and not forgetting that lenders are businesses) are exposed to all manner of risk; market, operational, financial, consumer and pure liabilities; all contributing to continual and continued exposure.

Some businesses will manage to hide from some risks, some are on a hiding to nothing; the risk is, what do you expose and what do you reject?

 Image and Article credits: Copyright SUF © 2014

Some statistics  and studies for September – Make of them what you will…..

56% of a recent Future of England Survey felt public spending in Scotland should be reduced and 66% think Scottish MPs should be prevented from voting on English laws if it decides to remain part of the Union after the Scottish Independence Referendum.

Giving a balance of plus 25, a CBI Survey shows retailers optimistic about sales, with more shop owners with expectations of sales rising over the next three months than expectations of sales falling. The highest figure since May 2002, sales have grown at their fastest pace in six months.

London owes the highest amount in mortgages according to The Royal Mail Postcode 40th Anniversary study. The Royal Mail’s online Postcode Finder is one of the UK’s most used webpages with around 100,000 visits a day – more than 40 million a year.  There are 3,000 postcode districts in the UK. The postcode HD7 5UZ in Huddersfield, West Yorkshire, covers seven streets, more than any other in the UK and Westfield Shopping Centre in Stratford, East London, is so big it has its own postcode, E20, which was previously the fictional location for BBC soap EastEnders.

14% of the 993 of Europe’s largest public companies Accounts showed improved days working capital (DWC) for three consecutive years, shows the European Working Capital Survey.  Businesses are benefiting from an increased focus on working capital but sustaining working capital remains a major challenge.

The results of a study in Australia  (the first country to standardise packaging for cigarettes) suggests there  is ‘no evidence’  behind many of the “fears” proposed by opponents of standardised ‘plain’ packaging of cigarettes and that no evidence was found of small retailers being hurt by the change.

House prices average is now £189,306  according to Nationwide, with a +11% comparable to August rise. Property values were +0.8%, a sixteenth monthly increase and Land Registry figures suggest price increased by +1.7% in July, the biggest monthly upswing in five years, with Merthyr Tydfil beating London as the area with the strongest house price growth at local authority level.

Image and Article credit: Copyright SUF © 2014

For they surely will….

Inflation Report Recap.

  • August 2013 – Forward guidance would use several indicators, mainly based upon unemployment, labour market, working hours and surveys of ‘spare capacity’  in companies. The degree of spare capacity would reflect upon any increase in Bank Rate.

  • 18 additional indicators were added for degrees of space to the projections.

  • The last report (May 2014), a goal setting football analogy, indicated no early rises and there was a general consciousness towards it being after the General Election (2015), when rises would be up to 3% between 2015 and 2017.

The latest Report  states that it expects Interest Rates to rise in line with market expectations, with an emphasis on gradual rate rises. There are suggestions of a Rate Rise around the 0.75% mark during the 4th quarter, followed by increases to 1% by early 2015, with slower increments to reach about 2.5% -3% by 2017 (Mark Carney’s speech  at the Mansion House indicated there might be necessity for an earlier rise).

Supporting indicators of an Inflation Rate jump in June, from 1.5% to 1.9% (the target is 2%), Press giving out  business optimism as being high for economic growth, figures from the ONS showing growth, unemployment figures showing falls (although wages are slowing) blended with opaque measurements, leave the question hanging, “When will Rates start to rise?”

Anyone selling crystal balls might do well over the next few months.

Image and Article credits: Copyright SUF © 2014

InflationReportAugust2014

Know Anywhere I Can Get It Cheaper?

 

Hello – My name is Mike and I’m an addict.

 

I realised I had an addiction when I’d reached for something stronger than face-palm.

And as it seems, rarely does a week go by when I remain ‘sober’, and my head doesn’t take and involuntary rest on the desk because someone always swings by to tell me they’ve done the maths, know the numbers and all they now need to know is…. ‘can it be done cheaper?’

That’s my relapse cue for some surface impact, now being achieved through the namely Headdesk (known to some as BHOD – Bang Head On Desk), an extreme form, which for those who partake be warned - taken too swiftly can almost knock you out.

The root cause for my habit comes from back in the day and some novice landlords: there is no rationale where there is no experience, therefore I shouldn’t have allowed this to be be sufficient reason to start using facepalm and, had I managed to find some form of alert to those coming to me with bad habits, I might not have compromised myself by moving on to double facepalm.DoubleFacePalm

I admit that my drug of choice is a crutch. It gets me through when I’m dealing with  those who don’t want me sharing my impartial knowledge, offering honest feedback or benefit from my working world’s experience. But, although it’s a dependency spurred by people following their own bad habits, doing things they might not want to do but not knowing how (or wanting) to let go, it’s not a vicious habit and only happens when I witness opportunity, strategy and long term thinking being sidelined. For example, when I’m presented with a cost-saving notion because it’s a snapshot to a quick fix or deemed the cheapest option, I take my own quick fix; which doesn’t impair my work performance, and hasn’t caused any short term damage (not certain about the long term!). Except that, now, because I’ve turned to Headdesk, with its giveaway thump, I realise my downfall might be around the corner,  “Hey Mike, is that the sound of you wracking your brain because you didn’t know this already?”

When we want to find the cheapest option and the easiest route, our expectations deflect away from wearisome bureaucracy and finding gateways, it appears easier to spend time with a comparison site. And, when I’m asked to confirm if something can or cannot be done cheaper, there is a bonus for these prospectors because I’m happy to confirm to them the comparison site is indeed a straightforward way of getting information. Comparatively, before any hard surfaces meet my forehead, I’d be focusing on features that mitigate costly blunders, the things which aren’t found on comparison sites and the things which by their very nature aren’t straightforward.  When I notice an equation is missing some numbers which can make a difference in yields, it’s not always received as helpful information: the response lever releases an exit where sheep are separated from goats.

“Those who mind don’t matter, and those who matter don’t mind” (Seuss)

These are confusing times, who to trust and who not to trust is difficult enough without involving one of the most emotive commodities: Money.

That’s the reason you’ll sometimes find me with my head deeply embedded in my desk!

BangHeadHere

Image credits:  Article credit: Copyright SUF © 2014

Difficult to think about December in August however, Saturday 6 December is Small Business Saturday, the celebration day of ‘shop local’ and use independent-owned businesses, an initiative that promotes at all levels the support of small firms and have started their 100 countdown.

Santander apparently had an issue with the ‘moral problem’  of the aptly named Circus Uncertainty (you couldn’t make this stuff up!) when they wanted to set up a business account.  It seems that burlesque-style outfits worn by the showgirls of the 40 strong troupe might have made the bosses backtrack (wonder if that was at risk assessment?), that the bank didn’t want to be associated with. But ‘committed to supporting the local business community’ (and some press coverage) the bank has now re-opened discussion with the circus owner.

Money’s still too tight to mention according to the BoE,  who began collecting data on loans to non-financial small businesses in 2011. Consequently,  there is to be a wide-ranging regulatory probe (their words not ours) into the UK banking sector that will focus on personal and business accounts.  Still with the BoE, new plans have been revealed for Bankers who break rules (following alleged Libor rate-fixing) to face potential bonus clawback, and the prospect of custodial sentencing as part of risk management and regulation. The next MPC meeting  to August 7 will see the next interest rate decision. New Deputy Governor Nemet Shafik, who will join the bank on 1 August, had said the bank was likely to revise down its estimate that spare capacity in the UK economy is equivalent to 1% to 1.5% of GDP in its August update – a sign that the time for a rate rise is moving closer.

The Tax Office is to go on strike because of backlogs, delays and apparently private debt collectors. Strikes will be spread across the country on different days.  Plans are also being introduced by HMRC for new Direct Debit recovery powers under which they will be able to deduct tax owed directly from the accounts of debtors (providing £5,000 remains across all accounts including ISA’s).

HSBC is closing accounts to some Muslim organisations with a reasoning given of the service provided would be outside the bank’s ‘risk appetite’.  The bank has said that it was ‘applying a programme of strategic assessment to all of its businesses’, following a fine over poor money-laundering controls.

With 25% of small businesses still not online, the UK’s largest domain registrar is on campervan tour around the UK to highlight the importance of having a digital presence.  Starting in July (Newcastle) and finishing in London (12 August), they’ll apparently be demystifying the online world.

Image and Article credit: Copyright SUF © 2014

 

 

There’s a lot of noise surrounding a proposed eighteen month enquiry, (similar to that made into the energy industry), towards the UK’s four largest banking groups known as the Big Four (Barclays, HSBC, Lloyds and RBS). Apparently holding 77% of customer current accounts between them, they also hold the potential to face a competition investigation (followed by report and recommendations with reforms cited ranging from free cash machines to a break-up of the banks).

It seems the love of a good story requires a big finale.

Will the hallmarks of the major banks be proven to be barriers to customers? Is it that customers ‘vote’  by where their accounts are held? Could ‘compliance requirements’ or repetitive patterns illustrate obvious reason? Has public engagement met a point of no return?  Would the loss of free banking ignite a reaction?  Might a gaping hole be found, or announcement (accompanied by some chin-stroking and a dramatic effect – Dah-Dah- Dahhh!!! sound) reveal, ‘public perception has replaced missing reality’.

The market share report  would be undertaken by The Competition and Markets Authority, with consequential recommendations relating to any surrounding  confusion and cross-subsidies for personal and some small business lending accounts.

It will be interesting to see whether challenger banks (with current rules meaning different reserves held) would be included, or how different ‘built-in’ biases, or that some have narrow fields of vision (only considering the immediate) while others have a reluctance to change built on routine, would be considered.

So it’s hardly a spoiler to say, if there is another investigation in bank practices…. it’s unlikely to be a breath-holding finale with special effects…. and more of a soap opera with repeat lines.

Image and Article credit: Copyright SUF © 2014

Stuck in a Rut?

In the intervening years since I last viewed an end of year school report, things may have changed. Rarely containing a personal comment, they had to be scrutinised for hidden meanings to talk over on parent’s evening. Promises of trying harder were made for after the summer break… the fresh start of un-graffiti-riddled folders and un-bitten pen sets.

Similar to an end of year school report, commercial lending annual client reviews have content which rarely deviates too far from standard statements. Comment of the, could do better or has the ability but needs to focus ilk is made to those whose promises go unfulfilled, with the more usual fare being about fiscal sustainability and continued improvements, steady and measurable progress, operational effectiveness and manageable growth.

To sustain trying harder away from being an abstract concept, the follow through is measurement.  Numbers3

Capital, cash flow, credit, reserves, liquidity, surpluses and reorganisation are boring (for the most of us). It’s only when I get my teeth into a project that the structure of those elements take on a different shape, when their life-cycle comes alive, then I get interested. But, for the smaller business owner, when there’s little or no co-operation from the channels or instruments used for these elements, it can be very frustrating – and easy to see why focus disappears. There’s a trajectory to the great unknown which is daunting enough without increasingly hearing the latest in vogue F-word lavishly bandied about.

Distracted focus from a commercial liability can undermine its strength when the base-lines used to measure creditworthiness or business performance keep shifting.

Aversion, happening further up the food chain of global markets, acts to exacerbate the problem of financing for the smaller business owner. Limitations are trickling down in the real economy, at the same time as costs rising; disconcerting the independent business owner and disorienting general financial conditions. Even with positives to a business investment, even for the risk-averse and even in an F-for-Frugal environment, sustaining profitability can suffer from caution as businesses are being forced to operate differently.

Lending banks won’t deviate from their deposit base as they shore up their capital base. The UK inflationary pressures are low, with a likelihood of interest rate increases looming ever nearer.

CanaryWharf6
Banks, and other lending sources, are businesses – hugely complex businesses. They have a business plan or operating strategy (that includes a marketing presence). They’re run with strategic focus, which has strategic objectives and a perception of risk. They have lending profiles and use cost control. Targets seek returns and are derived from KPI’s (Key Performance Indicators), monitored by KRI’s (Key Risk Indicators) for losses (immediately and effectively).  They often have a mix of funds and borrowing, debt and equity to operate with. They use monitoring systems for their operating expenses and price margins. Sometimes mid-term reviews are implemented for corrective measures to their targets. They look to minimising their cost of capital and balance their own capital, borrowed funds or reserves and their internal management systems expect customers to operate similarly.

What happens when a businesses system doesn’t have those elements available or implemented?

The only difference between a Rut and a Grave…. is the depth.

Image credits: Sonny Abesamis and SUF   Article credit: Copyright SUF © 2014

 

 

 

 

 

 

The FPC (Financial Policy Committee) has proposed new rules for mortgage lenders which caps loan-to-income ratios and includes interest rate stress tests. Lenders will not be able to have more than 15% of new mortgages at loan-to-income above 4.5 times and it applies to all Help-to-Buy loans. Coming into force 1 October, the test ruling applies to the first 5 years of the loan and assesses the borrower being able to afford repayments, if their interest rate rose by 3% above the rate at origination. The stress tests are generally in line with those already implemented by major lenders as part of their affordability calculator and are part of policy measures being taken to limit the risk of house prices being detached from earnings. The restrictions cover owner-occupier loans however the FPC minutes  state ‘The FPC considered the need to monitor mortgage lending activity beyond the scope of the recommendation…This included close monitoring of the buy-to-let market….’

Payday lenders and other firms offering high cost, short-term credit will face new rules applied to rollovers, continuous payment authorities and risk warnings, from July 1. Such high-cost short-term lenders are restricted to two unsuccessful attempts to use CPA (Continuous Payment Authority) to take a repayment and can’t use CPA for part-payment. Similar rules are applied to loans repaid in instalments.

UK house prices increased by 1% in June (11.8% higher than June 2013), according to Nationwide Building Society; all regions showed annual price gains in the second quarter of the year. Their current figures state the average price for a home is £188,903, with price increases 14 months in a row.

According to a survey of 1,000 NLA members the average void period experienced by UK landlords has continued to fall and is down to 2.7 weeks, bringing it to 2012 levels. High tenant demand is credited to keeping the time a rental property is empty between tenancies. The survey was to find the top factors that landlords consider when getting ready to make a BTL purchase. Quelle Suprise!  Landlords prefer to invest in areas where they have local knowledge and understanding of market trends. Other factors were cited as strength of tenant demand in the chosen area, local rent levels, capital growth prospects, local transport connections and almost ¾ of the participants said they’d be looking near their own home.

The British Retail Consortium has published recommendations for the reform of business rates. Calculated on the rental value of properties in 2008 (before the recession) it is therefore thought not fair to businesses competing against online-only businesses. The recommendations include reducing the total amount of business rates and that they are shared more fairly between different industries, including incentives for energy efficiency.

The Market Purchasing Managers’ Index (PMI)  showed a score of 57.5, up from 57.0 in May. Any figure above 50 indicates growth in the industry and the UK manufacturing sector has grown at its fastest pace for 7 months (June) with job creation growing at its fastest for 3 years.

That’s the serious bit….. now, on a more flippant note…..

A 55 year old Entrepreneur / Consultant has recently joined LinkedIn with an apparently list of more than 150 careers. The former astronaut and fashion designer always has a ‘smartphone, tablet and briefcase by her side’;  she is apparently a ‘smart, stylish career woman’ whose business is named Dream Incubator. And (for those who like management speak) her tagline ‘If you can dream it, you can be it!’ might inspire a LinkedIn invitation…… to the plastic lady known as Barbie ….. she might be dressed, but is she ready to work?

Image and Article credit: Copyright SUF © 2014


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