Heed the bank’s advice

Banks say they love you and trust you but when you get there you find they’ve chained the pens to the counter. A client whose business had been sent to the wall commented the other day that being with the same bank for thirty years seemed to count for nothing.

It is true that banks are ready to put aside a relationship of many years to get their money back. This does not make your bank the Great Satan although, as your finances worsen, it may seem that way.

Let’s get expectations straight. What can banks do? They can enforce the loan against you and anyone else who has guaranteed your debt. So, for example, if you or your guarantor has a house, the bank can force you to meet the market. This might mean selling your property at auction for whatever price you can get, however low. Depressing stuff.

In this scenario, the bank manager is not a Dr Evil or Mini Me (although the likeness can be uncanny). In fact, the bank manager is a very good source of information and wise counsel. They have seen it all before. To alienate your bank manager would be a mistake.

If your business is going bad, at some stage your bank manager will stop lending to you. This is not a cue to borrow money from your family in order to make loan repayments to the bank. Parents, it is not a cue to bail out your child, again! Nor is it the signal to put your bank loan repayments on your credit card. Your bank manager’s refusal to continue lending to you is an excellent assessment of your position. Heed it.