Talking last night with insolvency experts, it would seem that the world from their perspective is a dark and dangerous place now. By far the biggest single reason for business failure in their opinion is the global credit crunch/crisis.
There is no doubt that today, when presented with a lending opportunity bankers are thinking much more than twice. They are also becoming less forgiving with businesses where the bank suspects that the future is bleak. In many instances these banks are forcing Investigative Accountant reports upon the clients, as is their right, simply to have the Accountants tell the bank what they already know – this is not a good customer. The same amount that the client pays for the Investigative Accountant could be paid to pay the same Accountant to help guide the business out of the pickle.
Banks however have been more nervous for over 6 months now, and in fact, we are finding that in fact at Business and Corporate banking level, banks have calmed down somewhat. They are still open for new business, and staff are still being remunerated to find new business. However credit departments (who control the cheque book) have gone back to basics and are, for the most part applying sensible and prudent credit process. The deals that they have stopped doing, are the deals that they should probably an hot done in the first place!
However one thing we are noticing is that it pays to have a banker help you prepare your submission. Addressing all the negative aspects of your business shows that you are in control and that you know there are negatives. A customer that does this (assuming the underlying foundations of the business are sound) is attractive because it shows that they know their business, they are strategic in their ability to identify and deal with weakness, and they are honest and up front – in other words less likely to surprise the bank.