Archive for the 'Case Studies' Category
Please note: This is not an attempt to scare anyone, more to alude to opportunities to protect your business moving forward in times of financial market flux.
Your banking arrangements have been fantastic over the last 7 years, You’ve made all your payments on time. The Bank has given you most of what you have wanted when you generally wanted it.
When things are good there is little to be worried about from yours or the banks perspective. But for the last 12 months things are not so good!
The Banks and other lending institutions haven’t been able to get money/capital the way they use to. If they are, the cost of obtaining it is going up.
What does this mean going forward?
Well … we all know that:
Interest rates, Fuel and Food have all moved up. The RBA is suggesting that there is a need for 100,000 jobs to be lost over the coming period. With the reduction in confidence and the slowing of the economy, small business is going to come under some great pressures if it hasn’t already. Debtors starting to stretch – Creditors starting to push.
This being the case, banks are likely to take a position that they ‘need to conserve our reserves’. They are doing what is important for their business and that is reasonable! But the implications for your business may be profound. If not today it will be in 6 to 12 months time.
Consider this: All your savings, house, super and perhaps one or two other things that you have forgotten, along with Credit Cards, home loan, Business loan, Business account are all with the one Institution. You have met all your payments since Adam was a boy. But the bank changes their approach or assessment of your business. Because the Banks need to conserve their reserves!
What happens then, the relationship you thought you had along with the good payment history doesn’t count for much. Your effectively left financially hamstrung
What would happen if they used your savings to cover some of the house debt or credit card, because the mortgage I signed has an ‘All Monies’ Clause which allows surplus funds to be utilised to cover other debts. (Usually if you are in default). Or the credit card is behind but everything else is up to date, you could be considered in default on all your borrowings. Guess what happens then?! You’re in a little trouble with not that many options to fix the problem. If you think taking to another bank, you need to think again. They are under the same pressures.
When you are most likely to need some flexibility or assistance from your ‘banking relationship’ there is a strong possiblity your that your bank is not going to be prepared to help you.
Is this the time to consider finance and banking options for you & your business?
Is it time to be protecting your financial flexibility before it’s too late?
Talk with Finance Know how obligation free to determine some options. There are various opportunities that you may not have considered.
July 22, 2008 12:00am
MORE Queenslanders than ever before are defaulting on their mortgages and losing their homes to the banks, caused by high interest rates and petrol pain.
State court records show the number of property repossessions has escalated in the past few months and housing experts blame rising petrol prices as much as interest rates for the spike in cases around Brisbane’s urban fringe.
Records show the number of repossessed residential and commercial properties hit a record 1019 last year and continued at the same rate – about 85 a month – until May.
But a Courier-Mail search of electronic court files has revealed the state’s Supreme and District courts handled 100 property repossession cases in June and another 83 cases by July 17, with two weeks of the month still to go.
The figures show a majority of the recently surrendered homes were in suburbs surrounding Brisbane and on the Gold Coast.
Browns Plains couple Robert and Bettina Bengtsson have to come up with a seemingly impossible sum of money within days or have their Browns Plains home repossessed.
Aged 31 and 27, with a nine-month-old baby to look after, the Bengtssons have already cashed in their super, looked for higher-paying jobs and tried to start a business.
But they are still about $14,000 behind in their mortgage payments, which they have defaulted on numerous times.
Mr Bengtsson said the nightmare started when they both lost their jobs. Mrs Bengtsson was pregnant when she lost hers.
“Everything was going great and then the company I was working for decided they were going to close down nightshift, so I took an involuntary redundancy and my wife, because she was a casual … they just said she wasn’t needed any more,” Mr Bengtsson said.
“When we first got the house it was only $437 a week, so we were paying $500 a week.
“And now it is up to about $550 a week, so it has jumped over $120 in those two years.
Bray Park, Scarborough, Narangba, Alexandra Hills, Kingston, Browns Plains and Thorneside are the top targets for repossessions in Brisbane, while Carrara, Arundel, Ormeau Hills, Currumbin, Tallebudgera Valley, Runaway Bay and Surfers Paradise were some of the affected suburbs on the Gold Coast.
National Shelter chairman Adrian Pisarski said the figures demonstrated the compounding effect of high petrol prices on already financially stressed homebuyers.
“It always seems to be in areas poorly serviced by public transport,” he said.
“People there are double-whammied. Their housing costs are going up and their transport costs are very high because they are car dependent.
“I think many households would cope with one or the other, but not both.”
Housing Industry Association chief economist Harley Dale said a higher rate of mortgage defaults was expected, given the increased burden of interest rates and petrol prices.
HIA calculations show the repayments on a $250,000 loan would have increased by $449 a month in the past three years, while the monthly cost of petrol for an average household would have risen by $150 in the same time.
It has been estimated that about 160,000 Queensland households are experiencing mortgage stress.
“There is no doubt it is a much more difficult environment out there in 2008 than it was in 2007,” Mr Dale said.
Mortgage and Finance Association Queensland president Bruce Mawson said stalled property values had exposed some stretched homebuyers, who had been in the habit of using the equity in their home loans to pay off other debts.
He urged anyone having trouble making their mortgage repayments to talk to their bank as soon as possible.
Credit crisis to crunch harder next year
Author: adminCourier Mail
July 11, 2008 02:22pm
NEARLY half of Australian businesses have been affected by the fallout from the global crunch but the worst could still around the corner, a credit insurance company says.
Atradius Australia and New Zealand managing director David Huey said payment defaults and insurance claims reported to his firm had doubled since last year.
“Our enquiry rate for new business has also doubled, in part due to the high-profile insolvencies like Beechwood Homes, which has meant that industry segments like construction have been looking at insuring themselves against non payment,” Mr Huey said.
Companies in United States had the highest response in a 14-country survey.
About 68 per cent of US firms said they had been affected by the credit crunch, followed by Mexico, at 60 per cent.
Other nations where companies said the credit crisis had a high impact were Italy with 58 per cent, the UK, 46 per cent, Spain, 44 per cent and Australia/New Zealand, 43 per cent.
The Atradius credit crisis survey analysed comments from 2,500 respondents about their company’s experiences and the likely effect of tougher financial conditions.
“Factors that may be contributing to these reports include reliance on the building and construction or the financial services industry for GDP growth, a relatively large percentage of GDP tied to trade with the United States or heavy use of receivable securitisation,” Mr Huey said.
Restrictive credit and increased default payments would dampen growth and raise business defaults globally for the rest of 2008 and into 2009, the survey said.
Some 71 per cent of companies said an increase in payment defaults was their biggest concern, 67 per cent worried about restrictions in sales growth and 65 per cent feared increased capital costs.
Mr Huey said it was essential for a healthy company to be aware of how to protect themselves from risk exposure.
“The credit crisis is highlighting the importance of protecting your cashflow,” he said.
“The reality is that without good cashflow your business will be in jeopardy.”
Do your finances need a new hair style?
Author: adminLike bad hair, how long can you afford to let things go? If your fringe stopped you from seeing properly & you nearly had an accident as a result of it getting in the way or distracting you, would do something about it & get it cut!
In terms of your cash flow is it starting to go grey and thinning? Just like my hair!? Perhaps it’s time for a new finance hairstyle. One that will help with the working environment! Bottom line -improve the amount of cash you have, to do what you need to do, when it’s required.
Hairstyles can go out of fashion, but for now perhaps the number 4 is required with a few highlights. Keeping it simple, but works for the foreseeable future until it grows a little and then it can be developed into another style.
Some instances where you may be able to adopt the Number 4 could be:
Self employed – who have taken on a ‘Lo Doc home loan’ in the last few years. No doubt the debt had been capped to a % of the value of a residential property. That was great before because you didn’t have to provide financial statements and alike. The down side is you are likely to be carrying a lot of ancillary debt on top of this. Like credit cards, car & equipment loans etc etc. All of which drain your cash flow resources.
There are lenders that can role several debts into one. In a lot of instances there will be a requirement for financial statements to be provided however there are others that will consider the situation without profit & loss statements. The end result being that perhaps hundreds or even thousands of $$ can be saved on a monthly basis.
The structure of your debt may need to be looked at, are there commercial assets that could be structured over longer periods?
What sort of debtors do you have? Is there an opportunity to have those funds quicker?
Can you gain discounts for quick payment?
All these sorts of questions need to be asked of you when looking in the financial mirror. Could you need a new finance hairstyle?
What have you got to loose in asking the question? Ask Finance Know how!
SMALL businesses that deal mainly with householders are now finding it harder to be paid because of rising interest rates.
Author: adminCourier Mail April 07, 2008 12:52pm
SMALL businesses that deal mainly with householders are now finding it harder to be paid because of rising interest rates.
Plumbers, electricians, accountants, architects, builders, mechanics and even schools have to use tough tactics if they want to extract from householders what is owed to them, said debt collection agency Prushka.
“An air of nervousness has afflicted the business-to-homeowner sector as we have witnessed a marked increase in organisations taking a much tougher, almost relentless attitude to recovering overdue debts,” Prushka CEO Roger Mendelson said.
“The trend has become quite noticeable. Prushka is receiving accounts from this sector at a much earlier stage in the cycle than previously, with businesses less open to negotiate terms directly with their customers.”
“Now for the first time we have tangible signs that the last interest rate rise has started to bite.”
He said the signs came from the company’s existing clients who have businesses that deal with householders.
“Our best test of the changing environment is in tracking our existing clients,” said Mr Mendelson.
“Their debts are fresher, which means that they are under pressure for the money that is owed to them.
“The feedback is that it is becoming harder to collect the money that’s owed.
“But this isn’t happening with business-to-business clients,” he said.
“The household budget is now under more pressure, while business cash flows are still reasonably strong.”
He believes, however, business-to-business arrangements will be affected soon, that there will be a flow-on effect when one business’s cash flow is affected because of the non-payment of bills by householders.
He said small businesses used to be lenient with their payment terms but, as things have tightened up, this has changing.
“They are now tightening up on the credit they allow,” Mr Mendelson said.
“They are not concerned if they upset a client. Instead they are putting pressure on them.
One option for business owners was to offer an instalment payment plan but, if that failed, the next step was to take legal action, he explained.
Demanding the money upfront before the job began was not an option for small businesses, said Mr Mendelson.
“This would be difficult to do in a competitive market.
“All they can do is take more care in allowing the credit they used to offer.”
A big concern of small businesses was dealing with householders in the mortgage belts because, as well as having difficulty meeting their obligations, many are also losing the equity they have in their homes.
“By the time the banks sell them up, it’s too late for businesses. There’s nothing left. Two years ago if the bank sold up, there would still be some money left to pay outstanding bills.”
Mr Mendelson said he believed things would tighten up more before they got better.
How to ensure you are paid
- Make sure you have only quality credit
- Do more credit checks on new clients
- Be more concerned about who you deal with
- Act more quickly to retrieve debt
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