Friday, February 27, 2009

My personal banking crises!

I had a very difficult day yesterday.

Our illustrious bankers contacted us a couple of weeks back with the delightful news that they were reducing our overdraft facilities with immediate effect on not one but two of my companies.

This news came out of the blue and was triggered, as far as I can determine, not by anything we did but rather the general economic conditions.

They asked if I would come in and see them and I rescheduled my next day and did.

The result that they forced me to convert a portion of the overdrafts into personally gauranteed term loans and reduced our overdraft facilities by approx. 70%.

Armed with this news we all buckled down on a overheads slashing exercise, debt collection sprint and combined that with a concerted effort to get some short term wins for the company.

We were successfull but the downside - the increased business and short term wins did not turn into pay off- none of the additional money has come in with one of the companies we did the business with repeating my own banking story verbatim back to me.

The bottom line for one of the companies is that I had to let 2 employees go. Now whilst they both have underperformed, they both had potential but whilst we have lots of business invoiced I cannot get the cash in and without the cash (or the banking facilities to finance the cashflow) I cannot continue to pay them

So whilst the day was difficult for me, it is considerably more difficult for the two employees I had to make redundant.

It does seem to be a crazy situation that the taxpayer has been forced to take on the risk now posed by the banks, a risk entirely generated by the ineptitude of the banks themsleves and viable businesses are now being forced to let go those very tax payers who now shoulder the burden of the bankers mistakes.

However, I did watch a program a few months ago titled "the banks never lose" and I guess its true.

Whilst I am not a religious person I do remember from the bible that Jesus hunted the bankers and priests out of the temple whilst keeping the prostitutes within. I think he was right!

Now what doesn't kill you does make you stronger, but I feel a little winded after yesterdays debacle.

Ps. want to know which bank it was - the bank that bears the countries name "Bank of Ireland"

Pps. we are currently seeking alternate banking facilities

I have often heard it said that when the sun shines the banks offer you umbrellas and when the rain comes they take them away, but what happens when the banks themselves are the rainmakers?

What have I learned - I need to sort out better long term banking deals for all of my companies.

1 comment:

  1. That strikes a chord, something similar happened to us some years ago, before there was ever a “Banking Crises” Same bank, no longer our bank.........
    It happened twice. The first time the refusal, for no reason we could ascertain, almost collapsed the business. The second time they pulled a similar stunt coming up to Christmas so I moved bank and although ALL banks and entrepreneurs have a tenuous relationship, we have been happily working with Ulster Bank for six years now.
    In conversations over the years with other business contacts, it would appear that BOI are great if you are a very big secure cash rich business or a personal customer but the SME sector is regarded with suspicion and too high a risk. Branch Managers have almost no say in lending of amounts over €4000 and there has been so much moving and changing of Branch Managers, that developing a business relationship with a branch, is almost impossible.
    Keep treading, if it was easy everyone would do it...........

    Brendan Palmer