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Small Businesses Hoarding Cash Because They Fear Overdrafts Could Be Slashed At Any Moment

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http://www.dailymail.co.uk/news/article-2040197/Small-businesses-hoard-cash-fear-overdrafts-slashed-moment.html

Small firms are hoarding cash that could be used to make their businesses grow because they are too scared to ask for a loan, a major report said yesterday.

They are sitting on reserves which could be ploughed back into the economy in case their bank suddenly slashes the overdraft they rely on, said the Bank of England study.

Entrepreneurs now worry that even a request for a loan will ‘open a Pandora’s Box with a complete review of their existing borrowings’ – perhaps culminating in their overdraft being taken away.

Anyone on here hoarding cash?

Seems that business's don't want to trust banks either, we've got Siemans and Lloyd's of London taking cash out of risky banks and now we've got small business's not trusting UK banks if this report is accurate.

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Why would they want a loan if they have the cash already?

Peter.

It's not just businesses - barclays used to send me monthly offers for £20k loans, when i had plenty of cash in the current account. Rather annoyed me!

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Why would they want a loan if they have the cash already?

Peter.

Expansion, increased sales, new customers, increased credit lines etc. Require the loan to handle foreign orders for example. One guy on radio today said that's what he needed it for. Could even be to purchase an asset, such as a new expensive machine (no not a BMW for the owner).

SMEs are also reluctant to go to the bank and ask for loans, because of the damage done just asking. Their existing credit may be examined and withdrawn! Really, so much for project Merlin. Unless it's intent was to make SME's vanish overnight.

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Expansion, increased sales, new customers, increased credit lines etc. Require the loan to handle foreign orders for example. One guy on radio today said that's what he needed it for. Could even be to purchase an asset, such as a new expensive machine (no not a BMW for the owner).

SMEs are also reluctant to go to the bank and ask for loans, because of the damage done just asking. Their existing credit may be examined and withdrawn! Really, so much for project Merlin. Unless it's intent was to make SME's vanish overnight.

During the 90s recession (I saw this one coming and got out in time), my friends with large, debt funded, companies used to envy me with my small but profitable "cash cow" business.

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During the 90s recession (I saw this one coming and got out in time), my friends with large, debt funded, companies used to envy me with my small but profitable "cash cow" business.

COD. ;)

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Before I sold-up and retired, I used to run my business with a positive bank balance.

Weirdo. People like you RUINED the economy. :angry:

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Before I sold-up and retired, I used to run my business with a positive bank balance.

Ah the old fashioned way of running a business or public enterprise. How quaint.

Let me guess, I bet you never expanded unless you had the adequate capital without resorting to more debt either… what a hoot!!

Where would the economy be now if we all still deployed these antique and simplistic business models?!? :rolleyes:

An economy with no or low debt, my it's enough to keep a banker awake at night.

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I always run my business with positive cash flow and bank balances.

I never borrowed a cent to start it and have not needed to since (2005). It provides me and her indoors with a very comfortable lifestyle (income) and we only work 7 Months of the year. (Mainly because I can't be bothered with VAT and stay just under the radar). Same reason I can't be bothered to expand it.

And yes as per the original article there is a significant bit on deposit at the bank.

But then its people like me that drive whatever slimmed down mortgage market there currently is by keeping that dosh on account.

Edit typo..

Edited by geezer466

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If you already have a big line of credit with one bank.. I too would be scared to open the Pandora's box of applying to increase that line of credit.

What I would recommend is opening a second business account at another bank. And going through the application process with them.

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Ah the old fashioned way of running a business or public enterprise. How quaint.

Let me guess, I bet you never expanded unless you had the adequate capital without resorting to more debt either… what a hoot!!

Where would the economy be now if we all still deployed these antique and simplistic business models?!? :rolleyes:

An economy with no or low debt, my it's enough to keep a banker awake at night.

Here's an even bigger hoot... I resisted expansion and cherry picked the best customers leaving the rest to the likes of you :lol:.

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Before I sold-up and retired, I used to run my business with a positive bank balance.

Rank amateur.

Should have turned yourself into a limited company, ran up huge debts and gone bust whilst awarding yourself ever increasing pay rises for managing the debt you where running up.

I just thank god we don't have too many people like you around because we would be completely fecked if everyone ran there business this way.

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Here's an even bigger hoot... I resisted expansion and cherry picked the best customers leaving the rest to the likes of you :lol:.

Oh you're good.

Seriously though, how can anyone who is debt averse (i.e. me) have any hope of setting up themselves without some large independently funded capital?

Maybe sanity will return one day and people will once again run businesses without ponzi bankers. I won't hold my breath.

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Ah the old fashioned way of running a business or public enterprise. How quaint.

Let me guess, I bet you never expanded unless you had the adequate capital without resorting to more debt either… what a hoot!!

Where would the economy be now if we all still deployed these antique and simplistic business models?!? :rolleyes:

An economy with no or low debt, my it's enough to keep a banker awake at night.

It's almost impossible to do it nowadays. The larger companies demand longer and longer due dates for invoices. And they are so big they refuse to budge knowing that their money is key to you. Also they get away with late payments.

Unless your business line is unique or your service sooooo good that they can't get it elsewhere then you are sunk. What's an SME supposed to do?

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It's almost impossible to do it nowadays. The larger companies demand longer and longer due dates for invoices. And they are so big they refuse to budge knowing that their money is key to you. Also they get away with late payments.

Unless your business line is unique or your service sooooo good that they can't get it elsewhere then you are sunk. What's an SME supposed to do?

+1

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It's almost impossible to do it nowadays. The larger companies demand longer and longer due dates for invoices. And they are so big they refuse to budge knowing that their money is key to you. Also they get away with late payments.

Unless your business line is unique or your service sooooo good that they can't get it elsewhere then you are sunk. What's an SME supposed to do?

When I started my last business I negotiated 90 day accounts with all of my suppliers and gave 30 days credit to my customers. It's probably not so easy these days though.

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Here's an even bigger hoot... I resisted expansion and cherry picked the best customers leaving the rest to the likes of you :lol:.

Key words.....I think too many think that by expanding (taking on more debt and other fixed outgoings) they will get rich quicker but in reality it can be the reverse....service, reliability and trust make a business...keeping the quality sweet. ;)

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When I started my last business I negotiated 90 day accounts with all of my suppliers and gave 30 days credit to my customers. It's probably not so easy these days though.

I’ve just checked and can see that 10 years ago I was paying suppliers within 30 days, on average, while customers were paying within 40.

To-day, I’m still paying within 30 days, while customers are averaging 65.

The other thing I’ve noticed is that customers who used to email a remittance notice saying Invoice Number *** has been paid via BACS now send the same notice except the wording has been changed to Invoice Number *** will be paid via BACS on (to-day’s date plus 10 working days).

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In terms of payments my business is still the same.

Gather all invoices throughout the month - then pay them all in one lump on/approx 25th.

If yours arrives on the 26th - tough - you can wait till next month.

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During the 90s recession (I saw this one coming and got out in time), my friends with large, debt funded, companies used to envy me with my small but profitable "cash cow" business.

Is this the time to mention Serpico's posts dealing with what the banks did in the 90s recession?

Can they still be found?

Peter.

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Why work to make others rich if you can help it....a negotiated bank finance has its place and is nice to be there if and when required on your terms not theirs......any loan taken on has to be used wisely, productively thought through and any return calculated carefully.....debt is not there to stay in business...it is there to create more business. ;)

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My business operates on (typically)30 days supplier credit and 60 day customer credit( all our cutomers are large company's so this is non negotiable believe me) so the more our turnover grows the bigger our financing requirement from the bank-even with a substantial equity base to support the bank finance.

We won a substantial contract with a major company (£0.75m)and when we approached the bank(HBOS-we're stuck with them)to increase our facility they went away to think about it.Eventually they came back and said good news ,we will increase your overdraft by £250k.Pleasantly suprised I asked what the conditions would be.Said Banker responded-all we require is that you place £250k on deposit with us and sign a letter pledging the cash to the bank-don't worry it will be on a "high interest account " he said-(1% from memory).

After I'd stopped laughing I politely declined the offer and the new contract!We could have employed half a dozen people for 6 months on the contract.So much for "Project f....... merlin" or whatever its called.

You just coudn't make it up!

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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