SME’S still struggling for funding.

Small firms are struggling to raise the money they need to expand, according to a survey by business leaders.

The Federation of Small Businesses (FSB) found that 42% of those who applied for a loan said they were turned down.

The FSB said that while companies were weathering the recession well, business confidence was declining.

The British Bankers' Association said lenders were continuing to provide credit to customers.

They were also helping customers find alternative sources of funding if the banks could not provide it themselves, the association added.

Nearly two thirds of those in the FSB survey said they thought finance was unaffordable.

But the survey suggested the number of refusals had increased - from 40.6% to 42.4% on the previous quarter.

 The FSB said that, while many small firms would like to expand their businesses, access to funding was proving frustrating.

The federation claimed that a lack of credit had contributed to a marked drop in confidence, and said it welcomed the government's plan to set up a state-owned business bank.

The message is clear though - businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.

 

Banking disasters - Plus ça change.

Last week a former UBS  trader went on trial for fraud and false accounting having "gambled away" £1.4bn ($2.3bn) of the Bank’s money and caused "chaos and disaster". The trader exceeded his trading limits at UBS in a bid to get a bigger bonus.

He denies two charges each of false accounting and fraud between October 2008 and September 2011.

His actions are said to have threatened the Swiss bank existence and helped its share price fall 10%, by about £2.8bn.

"He faked bookings, he created false accounts and conducted himself as a master fraudster, deliberately and systematically deceiving and defrauding the bank which was employing him,"  said the prosecution..

At one stage he was in danger of losing the bank nearly £7.4bn.

The prosecutor said he failed to "hedge" against failure by placing balancing trades.

It was claimed that Mr Adoboli made false entries to make it seem as if the money he was gambling had been balanced by money coming into the bank.

The trial is set to continue and once again it highlights the basic problems of extremely poor level of Management expertise/control whilst furthermore illustrating the culture of greed which prevailed in the banking community.

As the alleged fraud had been conducted over 3 years it begs the question where the controls both were internally and externally i.e. the Auditors.

Before this latest black hole was discovered at UBS you can be assured that the trader responsible for this latest flame out was being lauded and applauded and the only calculations which were being scrutinised by the Bank’s management was the size of their forthcoming bonus payments.

 

 

Asleep at the wheel

Recent events have underscored how vital it is that Senior Management set clear defined operational and reporting procedures.

In many companies the Directors simply do not have the understanding of the mechanics or the day to day activities of the business which they purport to run.

For example I have worked in trading environments where totally unrealistic profit targets have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

Some of the most spectacular financial disasters have followed a period of ostensibly highly successful trading. In their desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is! It is a truism that recessions catch what the auditors miss

 

If your company is bucking the trend in these difficult times it may well be that you are implementing a winning formula.

However history tells us that it is sometimes a prudent course of action to look under a few stones – just in case.

 

 

Opportunity versus risk - the yin and yang of commerce.

Every business transaction contains an element of risk, yet at the same time how adequate are the mechanics and systems that are in place to manage these risks?

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner measures of business were jettisoned.

An analysis of the most spectacular flame outs all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

There has never been a more pressing need to examine all areas of exposure.

A forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked.

It is always preferable to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rd Party appointed to do it for you .

 

Reading the runes

 

How often in life either privately or in a commercial environment do we come across an entirely unique or new situation?

The current backdrop facing the world markets and business has parallels with previous financial crises such as the 18th century South Sea Bubble, the Victorian Banking crisis of Overend & Gurney, the Great Depression which followed the 1929 Wall St Crash, and the Dot Com Crash. In all of these episodes the common denominators were reckless pursuit of profit whilst fundamentals were ignored, the so called “get rich quick” school of business.

Following each of these debacles there was a collective reigning in and return to the principles of sound business.

However memories are short and it is not long before the blurring starts again and risky practices again become more and more the norm.

Complacency has resulted in the demise of numerous organisations. As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

 

Cost effective entry into the UK market

The UK offers a very attractive market for companies wishing to export their products. Counter party risk is identifiable and can be successfully managed.

 

However one barrier may be the perception of high operating costs. 

 

There is no doubt that to commission and run a UK operation can prove a costly commitment. The operating costs such as rent, communications, staffing are daunting, particularly in a start up situation where income streams are lagging far behind these up front out goings. 

This is where we can assist you, as an established independent company, we have experience of representing overseas organisations in marketing products into the UK. 

In addition to opening up new markets for your products and services we can also police the all important areas of logistics and payment of your invoices. 

An introduction to our activities can be seen on our web site www.glbconsulting.co.uk or alternatively why not contact me at gordon.blackburn1@btinternet.com to arrange a meeting to discuss how we assist you in entering the UK market.

 

The danger of pushing it too far

  

The most important component in any business relationship is the question of trust.  

The ultimate demonstration of trust and good faith is when a Supplier delivers goods to a Customer on Credit terms. 

It therefore is incumbent on the Buyer that they acknowledge this act of trust and observe the agreed payment terms. 

With the current pressures it is easy to understand the temptation of “pinching” a few days extra credit but this type of behaviour soon begins to pall. Once a Supplier feels that their Buyer is taking undue advantage the relationship is damaged sometimes irreparably. 

For any relationship to be sustained there has to be mutual benefit. When a Buyer gains a reputation for persistently crossing the line the merit in maintaining the account is called into question.