What will be different following the Coronavirus?

Very few of the current bunch are actually interesting, and it's apparent they have no war stories to tell.

Now compare that with say a David Niven interview, or Mel Brooks on Parkinson.
While you're on lock down, get on YouTube and look for Peter Ustinov. There are a couple of Parky interviews plus "An audience with" etc. Now there's a guy I would have loved to have shared a beer with.
 
What’s going on at the minute is the banks are not giving access to the cash the government wants them to give and the loans are as ever, either unobtainable or the rates so high, you don’t waste your time reading the terms and conditions.
In simple cases, banks will only lend to SMEs if there is a high probability of being repaid, based on either cash-flow coverage ratios or via security over assets. Cash-flows are down, and asset values have (or will) fall as a result.

The Government want banks to lend, but have not altered the risk weighting of those loans for regulatory capital purposes which, for SMEs, require 100% capital weighting. They are very expensive (in bank capital terms) loans to make, have relatively high risk and are relatively low reward. Banks can't be asked to increase access to loans, to soften lending criteria and, at the same time, comply with the very strict regulatory capital rules introduced post 2008.

Banks are also dealing with COVID-19, and their ability to prudently assess applications, as is required by law, is increasingly limited. As you would expect from a financial business, the major focus is currently on ensuring the existing loan books continue to perform.........which will be a major task in itself. Writing new loans in this environment where the applicant's FD has no idea where the business is going is for the brave or foolhardy.

Besides, any half decent SME FD with the turnover you suggest would have arranged a revolver, against which the business could draw in times of need.

Banks aren't charities, they're businesses. None of those I've ever worked for took any Government bail-out money, that was aimed at rescuing retail bank customer deposits, so let's not get confused with there being some sort of moral obligation to lend.
 
The rating agency Fitch have noticed that and have downgraded the UK accordingly. All the borrowing promised by the government will be more expensive.
Rating downgrades do not axiomatically lead to higher debt issuing costs for Government.

In fact, with UK Gilts, it tends to get ignored.
 
In simple cases, banks will only lend to SMEs if there is a high probability of being repaid, based on either cash-flow coverage ratios or via security over assets. Cash-flows are down, and asset values have (or will) fall as a result.

The Government want banks to lend, but have not altered the risk weighting of those loans for regulatory capital purposes which, for SMEs, require 100% capital weighting. They are very expensive (in bank capital terms) loans to make, have relatively high risk and are relatively low reward. Banks can't be asked to increase access to loans, to soften lending criteria and, at the same time, comply with the very strict regulatory capital rules introduced post 2008.

Banks are also dealing with COVID-19, and their ability to prudently assess applications, as is required by law, is increasingly limited. As you would expect from a financial business, the major focus is currently on ensuring the existing loan books continue to perform.........which will be a major task in itself. Writing new loans in this environment where the applicant's FD has no idea where the business is going is for the brave or foolhardy.

Besides, any half decent SME FD with the turnover you suggest would have arranged a revolver, against which the business could draw in times of need.

Banks aren't charities, they're businesses. None of those I've ever worked for took any Government bail-out money, that was aimed at rescuing retail bank customer deposits, so let's not get confused with there being some sort of moral obligation to lend.
no they are not which is I’ve stated the government’s strategy is flawed. In the case of an SME it’s a rare company director that will personally guarantee a loan, which is what’s normally asked for. in normal time, some would. In these times, I doubt it.

the government won’t underwrite the banks and unless they do, the risk weighting’s won’t change. Nett result - no money flows. If people’s revenues are collapsing you can be the best FD in the world and no one will touch you. I never said banks had a moral obligation to lend. It’s all about assessing the risk. I spoke to a lad who zi know who is the FD of a car leasing business. Skelton staff retained. All others furloughed. That will happen a lot. As for the British Business Bank who some people think is the great white hope, they make Barclays look completely risk averse.
 
I predict this will be long-running and the SIA will get in on the act.
Special powers will be granted to sturdy blokes in white shirts & clip-on ties, with qualifications as 'entry / exit technicians'. This will also see a marked increase in the number of Nigerians wearing Hi-Viz on our streets during their Uber 'downtime'.

@BugsyIV
 
Post-corona I suspect that we are in for austerity and a lot of it. I don't mean the get-the-economy-back-from-the-last-Labour-brink pseudo-austerity we were enjoying these last ten years but actual, ball-grinding, full-on austerity worthy of the name; austerity of the sort that HM Disloyal Opposition can really complain about, despite having no clue and no plan on how to rescue the economy themselves, the hateful, self-loathing, pointless, grandstanding, oxygen-thieving, waste-of-skin little fuckweasels.
Didn't know you voted Corbyn?
 
In the case of an SME it’s a rare company director that will personally guarantee a loan, which is what’s normally asked for.
Any FD (or, more appropriately, business owner) who personally guarantees a loan needs their brain testing, as it usurps the entire purpose of limited liability companies (the clue is in the name).

the government won’t underwrite the banks and unless they do, the risk weighting’s won’t change.
The two aren't connected. Bank's don't need to be underwritten, they're probably more solvent that they have been in a generation. Risk weighted assets (which sets the amount of "regulatory capital" a bank needs to set aside against a particular asset (e.g. loan) is set by international agreement and implemented by the BoE.

It wouldn't make any sense to change the risk weighting at the precise time the risk is highest.
 
Didn't know you voted Corbyn?
Its of no consequence whether he votes Corbyn or not...

He (apparently) looks exceptionally good in stockings - factor a beard into that equation also and it becomes a potential shitstorm!
 
Any FD (or, more appropriately, business owner) who personally guarantees a loan needs their brain testing, as it usurps the entire purpose of limited liability companies (the clue is in the name).



The two aren't connected. Bank's don't need to be underwritten, they're probably more solvent that they have been in a generation. Risk weighted assets (which sets the amount of "regulatory capital" a bank needs to set aside against a particular asset (e.g. loan) is set by international agreement and implemented by the BoE.

It wouldn't make any sense to change the risk weighting at the precise time the risk is highest.
It’s any company director in the case of bank dealings. If a company had a board with several directors, then each director is asked to sign a personal liability form. I know I am a company director and have been for several years. Been there, done that and got the t shirt.

In the case of the current position, the two are connected in so much that government is doing one of two things:
  1. either attempting to influence the banks with government policy
  2. Playing politics by broadcasting on tele what it’s doing knowing full well it’s a waste of time.
The nett result is the same - nothing. If the government were serious about this they would say to the banks ‘we understand the risk on this transaction and we will underwrite it.’ Which would allow banks to back off the risk and lend which is what the government is going to happen with the quantitive easing.

I am familiar with the FSA and retail finance legislation and do understand the regulatory constraints. I spend 5 years of my career in retail banking working very closely with the marketing functions to two leading global banks. I had hours of fund discussing propensity modelling to address precisely this issue - risk.

not meaning to be shitty by the way - it’s rock hard trying to have a conversation about this shit in 5 liners on an Internet forum with people you’ve never met!
 

Joker62

ADC
Book Reviewer
I predict this will be long-running and the SIA will get in on the act.
Special powers will be granted to sturdy blokes in white shirts & clip-on ties, with qualifications as 'entry / exit technicians'. This will also see a marked increase in the number of Nigerians wearing Hi-Viz on our streets during their Uber 'downtime'.

@BugsyIV
I doubt you'll see many Nigerians on the streets, the ones I've seen recently make Nuclear Technicians look underdressed!
 
It’s any company director in the case of bank dealings. If a company had a board with several directors, then each director is asked to sign a personal liability form. I know I am a company director and have been for several years. Been there, done that and got the t shirt.
It was a simplification.

I understand, believe me, I used to run the t-shirt factory.
 
It was a simplification.

I understand, believe me, I used to run the t-shirt factory.
best have a look at my post on Global M&A then.... trump has told all PE backed business they are on their own. All funds as you’d expect are going into propping up existing portfolios. I’ve got another call this morning which I’m doing for amusement - I’m expecting to be told no growth capital for 12-18 months
 
@Simmerit you started this thread, now what analysis have you done, based on the arrsers reponses where is the post CoVid 19 business ideas and start up going to be doing

Based on how this develops and people react, like I said before peoples hopes, dreams, ambitions aspirations will change,

Have you developed a business that will thrive post pandemic, there must be some out there I expect there are a few entrepreneurs developing their product and business plans as we speak

Out of adversity and all that.

Archie
 
@Simmerit

You post about banks - I know nothing about banks other than I have a bank account

As someone who has been looking to buy a house, the housing market is about to take a nose dive probably worse that post 2008 / 9

The banks and building societies will be sat on a lot of mortgages started since 2010 where the house - asset is now worth less that the mortgage, not a problem unless repossession increase but a lot of people will be sitting still with negative equity (help along nicely by Help to Buy in the past decade)

Archie
 

NSP

LE
Its of no consequence whether he votes Corbyn or not...

He (apparently) looks exceptionally good in stockings - factor a beard into that equation also and it becomes a potential shitstorm!
Yeah, baby, yeah!!
 
@Simmerit you started this thread, now what analysis have you done, based on the arrsers reponses where is the post CoVid 19 business ideas and start up going to be doing

Based on how this develops and people react, like I said before peoples hopes, dreams, ambitions aspirations will change,

Have you developed a business that will thrive post pandemic, there must be some out there I expect there are a few entrepreneurs developing their product and business plans as we speak

Out of adversity and all that.

Archie
Archie,

I wish I knew but I've not got a crystal ball mate. I'm currently watching and having discussions across my network to ascertain the lie of the land. My working assumption is its not going to be good and so far, unfortunately my working assumption looks good....

You may recall I posted a while ago saying the UK tech, bio-tech and tech manufacturing sectors (things like carbon emission reduction in the manufacturing process) are weeks from going off a cliff edge. Big article in the Torygraph yesterday saying exactly that and cross party members are lobbying the Chancellor. They need to move very quickly - weeks.

I got emails from the NHS last week telling me we are a mission critical supplier to NHS England and NHS Scotland, which I have to say is a bloody relief or I'd be worried. We were getting ready to do a deal with a major European telco in January with one of the global big 4 management consultancies. It vanished. They stopped responding to emails and calls weeks ago.... Commercial sector is in rounds of contingency management and business continuity planning. The impact obviously varies across different industries. I would be seeking to pattern down the hatches in any business in the current financial climate.

The issue for start-ups is they need access to working capital. Raising 150k of SEIS funded money (zero risk to the investor) used to be a breeze. EIS (riskier cash) was always doable - typically amounts in the region of £1.0 - £10.0m. BREXIT caused a hiccup with raising cash and the Corbyn risk closed it down for three months (bear in mind money still moves so it doesn't completely close down), and now this I don't think any entrepreneur will be able to raise working capital for a considerable time as there is a financial tsunami coming.

I've got a call with a fund in twenty minutes which Im doing for a laugh. Here's a note I've just sent to a corporate financier who sent me a shit email this morning:

Tim,

Global M&A is fcuked. I had a 1hr call with a transatlantic fund on Friday and its dead until end Q1 2021 as a consequence of Trump telling PE backed business 'you are on your own'. With the collapse in revenues being experienced by many businesses, few will pass the risk tests the banks apply and only a lunatic will give a personal guarantee.

Rather than trying to give business hope where there is none, my suggestion is you put your efforts into lobbying the government as the measures are woefully inadequate - with the exception of furlough which is basically mothballing your business.

Regards




Things will get better because business will always trade and find a way of trading. Just expect it to be very very low key for the next 4-6 moths is my view. What comes out of the ashes? Fcuk knows at the moment, but if I have any bright ideas, you will read about the island in the Bahamas I've just purchased as I wave goodbye to Blighty for good.......
 
@Simmerit

You post about banks - I know nothing about banks other than I have a bank account

As someone who has been looking to buy a house, the housing market is about to take a nose dive probably worse that post 2008 / 9

The banks and building societies will be sat on a lot of mortgages started since 2010 where the house - asset is now worth less that the mortgage, not a problem unless repossession increase but a lot of people will be sitting still with negative equity (help along nicely by Help to Buy in the past decade)

Archie
I spoke to the CEO of a national property business about 10 days ago (one of the very big ones) - he is one of our investors. He range me up to ask how it was going. He'd just sent 2,000 staff home. I said the good news is you may get relief on your business rates. We laughed. His comment to me was 'fcuk knows what shape the property market will be in in 6 months'. Give me a poke in 8 weeks and I'll ask him for a view for you.
 
.... trump has told all PE backed business they are on their own.
As he should, that's the trade the LPs put on.

It is what it is..........but doesn't help the poor saps who tread the boards for those companies on the shopfloor.

Leverage will be what kills them, as it always does. The smart banks will make more money refinancing PE and LBOs with good assets but interrupted cash-flow.......the harder the deal to make, generally the more margin. That's where my last shop excelled.
 

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