Banks – friend or foe?


The world banking system is in a turmoil, but there are major lessons to be learned, particularly in times of recession. And the sooner you learn them, the sooner you’ll be richer, happier and more in control of your life and business.

 Does it make sense that a small business pays into a bank a check for $10 that has come from another small business and it bounces through insufficient funds. The bank charges you $8. They try to present the check one more time and again it is returned and you get penalized another $8. This takes your account over drawn and you get a further penalty imposed on you of $25 for exceeding your limit, without permission. Small businesses are unwittingly supporting the banks profits to a massive degree!

The countless times I have had entrepreneurs ask me why their bank has given them an overdraft and then when times got tough they called it in, effectively collapsing their business. In other words they give you an umbrella and take it away when it rains! Banks have carrying out this type of cavalier activity for years and making inordinate profits in the process. Then they spend millions of those profits on expensive advertizing campaigns to attract new customers to their banks to counter the churn rate. They have totally ignored the customers they already have! If you or I treated our customers like the banks treat early-stage and start-up businesses you wouldn’t last a week! The above is just the tip of a billion dollar iceberg, but we haven’t got time to go into all the other way small business’s pay through the nose for a very expensive and lousy service.

 So what’s the solution? I thought you’d never ask! You need to alter your business model so that you can position your business so that you can use the banks and not be abused by them. Get out of the mentality of thinking about loans and overdrafts and think in terms of cash trading, increasing margins and massively boosting sales. Yes, you may have to entirely change the model, the business, or even industries. Go where the money is and make it yours. Try to get out of the banks clutches altogether, especially if you are an early-stage or start-up company. Never be tied to just one bank, get as many business accounts as you can. Use the banks only when you don’t need loans and overdrafts and if you are going to use bank money make sure you have massive excesses in terms of cash flow and profits so you can pay them back. Don’t give personal security, (there’s always another way, believe me) because as sure as night follows day it will get called in at the most inconvenient time.

 Learn from all the banks. They have locked onto a product where there is massive demand! They are constantly creating new angles and financial products. They change the rules of the games, so they win all the time – at your expense I hasted to add. Don’t get me wrong, I work with many banks and also have many more chasing me for business. They know that when I raise £1m to £10m equity funding for a client, that is the perfect time to come in with some bank finance.

 Spend less time and energy thinking and worrying about banks and start thinking in terms of a business model of your own – that works! Now is the perfect time to change boats (and banks for that matter!) and start paddling down the stream with the current in your favor. You’ve been paddling upstream for far too long! Believe me!

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They increased my business loan payments drastically when interest rates went up – as per `flexible loan’ agreement. But have refused now for 12 months to reduce them when interest rates have been reduced.


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