Courier 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

When a marriage comes to an end, it is always a tragedy. Of course the ending of the family unit and the emotional hardship for the children is the most difficult at the time of divorce. But the difficulty of separating one home into two can be challenging and tedious to say the least.

In addition to the management of the divorce, the household debt that was once shared as part of the family financial picture, must also be divided. In most joint credit contracts in Australia both parties are jointly & severally liable for the debt. So when the union splits up, the transition, from a financial point of view of your accounts separating, is not over night.

So one of the many issues to be discussed or managed is a plan on how to deal with the household debt. This is where emotions can get the better of people or a lack of awareness of not keeping up with these responsibilities in a timely fashion, that can have a NEGATIIVE IMPACT ON YOUR CREDIT FILE FOR UP TO 5 YEARS!

To put this into context, the oversight of not paying or perhaps abusing credit cards limits or trying to get one up on your ex will dog you for a considerable time after your relationship is no more.

Over the next 5 years your requirement for finance is likely to grow again through one reason or another. As a result of a dissolved relationship you will carry the poor credit burden.

Does an impaired credit rating stop you obtaining credit?   No! There are various lenders who cater to these sorts of situations. However it will come with an increased cost via interest rates and alike. And in a tightening credit environment, most lenders are becoming more & more particular in who they are prepared to lend money to.

However it pays to be mindful these sorts of solutions are not for extended period of time and are usually one component of a strategy to re-engineer your financial position.

In trying address some these scenario’s it may pay to consider some of the following:

Credit Card Limits – do they need to be cancelled or the limit reduced.

Budget – for 2 households, do the books balance?

Income – what & how you receive may change – support pensions, maintenance. How lenders view these may differ dramatically. What impact is it likely to have moving forward?

Remember most loans for a couple have joint & several repayment requirements. So if one party is not making payments the responsibility will be sort from you.

While this situation is most always challenging there are ways to deal with issues ahead of time and certainly if it has already taken place there are always differing solutions to assist in managing your finance requirements in the intermediate future.

Finance Know How is one who is willing to listen and provide some options for your consideration.

By Peter Jean and Ben Packham – Courier Mail

June 11, 2008 08:44am

• Demand for home loans has slumped in the wake of high rates
• Economist tipping property will be depressed for rest of year
• In-depth: The latest interest rates news and features

DEMAND for home loans is crumbling as would-be buyers are scared away by high interest rates.

Economists predicted yesterday that the property market would remain sluggish for the rest of the year.

The number of loans taken out for owner-occupied homes in Australia fell by 3 per cent in April, to a seasonably adjusted 57,503, Australian Bureau of Statistics figures showed.

It was the third month in a row that home loans fell across the nation.

Economists had forecast a 1.9 per cent fall for the month.

The slump suggests interest rates and soaring fuel prices have caused a serious slowing of the economy.

“Consumers are being battered from all sides,” Comm-Sec chief economist Craig James said.

“It’s not just the Reserve Bank lifting rates, it’s the fact that individual banks have been forced to lift rates, the cost of petrol has been going up, food is going up. It’s all putting pressure on people’s budgets.”

Mr James said the figures were “super-weak”, capping the biggest slump on record.

“This isn’t just another modest drop. This has been the third significant fall in home lending,” he said.

“We’ve had something like an 18.4 per cent fall in new home loan lending in the past three months.

“We haven’t seen a decline like that ever before.”

He said the slump would have a serious impact on the supply of homes, given rising immigration levels.

On the up side, Mr James said there was now little chance of an interest-rate rise before the end of the year.

“The Reserve Bank certainly doesn’t need to be following up with any further interest rate action at this time,” he said.

“The economy has already responded, slowing down significantly.”

Macquarie Group senior economist Brian Redican said the high interest rates would keep stifling the depressed housing market.

“There’s certainly no sign of a turnaround in the housing market, probably for 2008,” Mr Redican said.

“Until we start to see interest rates fall, and that certainly seems a long way away at the moment . . . all the risk remains on the downside.”

Housing Industry Association chief economist Harley Dale said though the property market was subdued, there was still a shortage of homes for sale and available for rent.

“HIA has maintained for some times that Australia needs to produce 175,000 to 180,000 new residential dwellings a year to meet current and anticipated demand,” Mr Dale said.