THE RELATIONSHIP BETWEEN banks and customers at the moment is a tense one.
TheJournal.ie carried an article last December by businessman George Mordaunt who wrote about his struggle to deal with debt and with his bank. In it, he noted that his own experience had inspired others to come forward with their stories – and that in general, those small and medium business owners in debt were “at breaking point, mentally exhausted”.
Here he outlines ten practical tips that might help business owners to get on top of their debt difficulties – and how to approach their bank.
1. Don’t wait, act early.
Avoiding problems will not make them go away. Contact your bank or lender . Start by writing to them advising that you have decided to engage. Make an appointment to meet with relevant creditors whoever they might be. Act now before your arrears get out of hand and understand that you are one of thousands of people dealing with the same issue. Many of us are guilty of not opening letters from the bank or avoiding calls and it can create real sense of anxiety, which only increases the longer you avoid the issue.
Understand your rights. In business you are protected by the code of conduct to SME, which banks are obliged to follow. As a home owner in arrears you have even more protection. It is always better to tackle the issues head on, but if you have been avoiding dealing with debt, remember that it is never too late. A lack of engagement will lead to legal proceedings.
2. Prepare, rehearse and execute
Prepare by asking a professional to help you create a statement of affairs and or a household budget. Create a professional template and understand it. Remember when you meet it your bank official they are YOUR salesperson within the bank so you must convince the relevant official that your recognise and accept that change needs to take place. Demonstrate the changes that you are prepared to make. The bank are obliged to react while recognising your efforts.
3. No empty promises – Sign up and stick to it!
Once you make a plan, stick to it. If you say you will make a certain minimum payment over a specific timeframe then do so. Do not agree to a payment plan which is not realistic.
4. The elephant in the room
If your proposal clearly sets out that you can only service a percentage of your debt than pro-actively ask the relevant questions about setting a percentage of the hard core debt to one side for a period of time . If mathematically you can prove that you cannot address some your debt, ask the bank for options around any residual debt that you cannot service. Start the conversation.
Educate yourself. Be different. Don’t wander into meetings unprepared. Understand the code of conduct. Understand your rights and in doing so you can avoid any bullyboy tactics.
6. Have a point of contact
Anytime you liaise with a lender take a note of what was said, what date and who you spoke to. Remember to take the name of the person you spoke to so that you are not explaining your entire financial history repeatedly to different people. Put all communications to lenders/creditors in writing and keep copies.
7. Create your own file
If you speak to someone verbally then ask for them to put it in writing. This allows you to review your agreements. Ensure that all communications to or from your bank or lender are put in writing and keep copies of same.
8. File it away
Having a good filing system is half the battle. Keep statements, receipts and correspondence in folders where you can access them if needed later.
9. Ask for help
A problem shared is a problem halved. Discuss your concerns with someone, whether it be your bank manager, a family member, friend or business mentor. There is plenty of advice available and nothing is beyond repair.
10. Legal action is a last resort
Banks are not keen to face the negative publicity of dragging customers who are in financial strike into court. They would much rather open a dialogue with a view to resolution. In the current political and legal climate Lenders/Creditors are no longer assured of the old, almost automatic, favourable judgements.
“Finally, this recession is happening to everyone. Help is available, once you make the first step to acknowledge your issues with debt”, said Mordaunt.
George Mordaunt’s company Insight helps with discussing, identifying and developing solutions to all business difficulties, including bank debt and personal finances, confidentially on a one-to-one basis. Advice is offered based on real life experience.