Low Cost Capital

2013-Q4 ETR Briefing

How to use risk to your advantage

As explained in the previous article “It’s all about Risk…” you’ll now understand that larger organisations get preferential treatment from banks.  That’s the status quo and isn’t likely to change any time soon.  So what can you do to improve the banks perception of your business, so that you achieve ‘next best’ status?

The answer is to make sure you present your business as the ‘next best’ lowest possible risk.  This means you have to remove all possible negative ‘what if’ scenarios, wherever you can. What if these top two customers cancel their business with you? What if your cost of supplies increases unexpectedly?  What if a senior member of staff leaves? What if demand in your market declines suddenly?  And so on…

The more you think about all the risks that undermines the integrity and viability of your business, then you’re thinking like a banker.  Banks don’t like risk.  If you have given sufficient thought to the removal or reaction to risk, then you’re making it easier for them to lend to you.

It’s all about Risk

Once you understand risk, then you’ll begin to understand banks and how banking works.  Banks, investors, shareholders, managers, financial markets, brokers and other investment/lending professionals all learn about risk.  That’s not to say they necessarily understand risk in all its guises, but they must understand the principal that high risk is bad risk.

Think of it like parenting. Does a responsible parent leave a young child with the wild teenager next door, or do they leave the child with a mature, responsible adult? If you were a bank, who would you rather lend money to: an established, well managed, large company or the young start-up business (notice how inverting this speaks volumes: ‘up-start’)?

As a bank manager, if you are paid the same salary for lending to large companies as you were for lending to the up-starts (sorry, start-up), but were only promoted when the loan was repaid, who would you lend too?

Unless you’re being obstinate, the answer’s simple: the established, well managed, large company is less risky than the young start-up.  So they get the money first (and in most cases, at much lower cost too). Only after the large corporates market is satisfied, will banks look to the micro-medium sized, more risky market.

Low risk, high volume lending is more efficient and ‘safer’ than almost every type of other riskier lending to the micro-medium sized business.  That’s a simple fact of banking and isn’t likely to change any time soon.  So don’t get angry with your bank, if you were in their shoes, you’d probably use the same principal: low risk

Related articles

• Alternative Banking Channels Will Not Eliminate Bank Branches

Welcome to Credebt Exchange Blog

Credebt Exchange® enables service and goods providers to offer their invoices as Exchange Traded Receivables [ETR] for sale on the Exchange. These ETR are attractive to Investors and when purchased on the Exchange, this provides Alternative Working Capital to the Originator/seller. A key objective for Credebt Exchange® is to achieve rates that are comparable to, and preferably less than, other commercial finance lending rates. By selling ETR, the trading organisation is avoiding the need for loans and/or credit facilities by using the ETR to provide Alternative Working Capital

50+ Retail Investors

Today the Exchange received funds from it’s fiftieth Retail Investor.  Since the first date of trading on 4 July of his Year (see article: First RSA/RPA Trade Executed), achieving 50 Retail Investors demonstrates a strong appetite amongst the investment community for strong, short term cash-equivalents such as ETR….

2013-Q3 ETR Briefing

Unaffected by Seasonality

The Summer months tend to be the slowest for most Originators (and indeed Investors), however, August continues the steady growth experienced in Q2. The performance demonstrates that the initial Members of …

First RSA/RPA Trade Executed

Volume trading in Exchange Traded Receivables [ETR], has been strong using Revolving Sales Agreement [RSA] block and buy-out trades to increase market penetration. Little, or no, initial resistance in the market. Deals are delivering on Investor Revolving Purchase Agreement [RPA] …

Membership, Fees & Charges

IMPORTANT:- Some links in this article will only be accessible to authorised Members that have logged into the Exchange Trade Centre

Credebt Exchange® aims to be clear and transparent on the how it deducts charges (i.e. fees and commissions) from payments to any Member account. Before examining any deductions from a Member account, the Originator should log in to their account and view the Important Information items listed on the Exchange Trade Centre |
Dash Board (access to the Exchange Trade Centre is restricted to Members only) The information provided here is required reading.

There is also additional information in all of the articles in the Credebt Exchange® Tips & Help public section of this web site.   If any aspect of what is documented is not clear, Originators are invited to submit questions to Support using the Support & Customer Care Form.  Questions submitted using this form are regularly added to the Frequently Asked Questions, or FAQ, section of this web site.

Combining the Frequently Asked Questions, the articles contained in this section, the Credebt Exchange® Tips & Help and the Exchange Trade Centre | Dash Board with the documentation sent to all Originator Members, should provide a comprehensive understanding of the service.  Originators and all Members are encouraged to communicate their views to the Customer Care Team.

The most efficient way to communicate with Credebt Exchange® is by using the Support & Customer Care Form.  All submissions are responded to within 24-72 hours.