It's time to work harder and smarter for your money

“It’s your turn to write this month's article Phil, I think Finance as a topic would be good”.

It's time to work harder and smarter for your money

I admit my heart dropped at the thought of trying to interest you in matters Finance in this Olympic period. I’m not going to shoehorn Olympic themes in you’ll be pleased to hear.

What are the current issues with finance – really only one, there’s not much cash around and more importantly, what is available has found its way under the corporate mattress. Many of our Blue Chip companies are sitting on stacks of cash. Why? Because the risk of investing in new projects is seen as too high. Handy if you have shares because they are being forced to pay some of it out in good dividends; not so if you are hoping to entice them to spend it on nice ideas you might have. 

Of course our traditional route of touching the banks for a quick loan has gone, as has adding a few quid to the mortgage as banks try to re-build tattered balance sheets. It’s scary to think that the Basel Treaty only requires banks to have 8% of their risky assets covered by capital, doesn’t leave much room when times get tough. Sounds like a 92% mortgage in our terms and you don’t get many of them now.

The good news is that most British banks are running at 12%, even more good news “we are very much open for business” - the bad news “for sound business opportunities”, with that definition getting tougher all the time.  

Recent experience of getting an increased overdraft for a highly profitable company, in the middle of doubling its turnover for the second year running and another with 150% asset cover (a bit more than 8%!) suggests that the banks are just plain running scared of their credit teams. Don’t let it stop you, but you will have to work harder and make them work harder to give you money.

Good luck in Going for Gold (sorry!)  

Phil 


Categories: Brainery