Credit Crunch to the Credit Freeze.

Credit Crunch is not the new breakfast cereal for economists. The phrase credit crunch has become somewhat of a "buzz" word. The financial sector has adopted the term, but also inherited its harsh effects. The predictions for the financial climate foresee the crunch to tighten further.This is why it is vital to gain an understanding on how it will effect your business. The term"credit freeze" will start to appear more and more  in the coming months, as the crunch turns to a freeze.

Some common sense.  Doom and gloom is no good for any business. It is high time to be positive and seize the opportunities that are out there. Previously the strong would overcome the weak, this time the quick will overcome the slow. All of the banks have tightened up their lending policies. We have the money, you have the customers, lets talk, and get  some leasing proposals underwritten and paid out.

What is a Credit Crunch?
A credit crunch is caused when their is a shortage of available credit in the banking sector. Credit is just another commodity as say oil or wheat. If there is a shortage, the price of the commodity will rise, and the terms offered will be harsher. This is simply what has happen in the finance sector,credit availability, and terms have changed, and we have to adapt to the new conditions.

What is a Credit Freeze ?
A credit freeze is where the banks or lending institutions show a great reluctance to  either renew a credit line or overdraft or reduce the amounts and terms in which they are prepared to offer to you. With the banks controlling about 90% of the small business lending market, either through overdrafts, or loans  or leasing; when they revert to type and cut back as they always do in a recession,  it effects all  the small business's in a disproportionate way.

What is Libor?
Libor stands for the London interbank offered rate and is the main indicator of interest in the London wholesale money market. Unlike bank rate, which is set directly by the now independent Bank of England, Libor rates are set by the supply and demand of money between banks. Historically there was a premium over the bank base rate of about 0.15%. It has  however over the last few weeks been between .75%- and 1.1% higher than bank base rate.  This has a direct effect on all interest rate based products from banks, be it mortgages to leasing.


How will the credit crunch effect suppliers ?  
Customers who would normally just contact their bank manager are now finding that their overdrafts are being reduced or called in, and loans  for equipment are much harder to acquire. Coupled with the effect that the rates offered by the banking sector are increasing, and debentures and guarantees are rapidly becoming the norm. The days of easy credit has gone for the forseable future.

How to beat the credit crunch and credit freeze.
As the credit crunch bites, suppliers who do not show to customers what they can fully offer, are simply not doing themselves justice. Put it another way, the pie is shrinking as  your customers experience the tightening of their business, by using leasing, you can win a bigger share of the shrinking pie. That is why Oak has launched Oaklease Direct, which is a lease rate comparison site to help both suppliers and customers through the credit crunch.

You would never fail to present your equipment other than in its best light. So why don't suppliers and manufacturers have a leasing page on their website? With the inclusion of such a page within your website, it would fully promote the availability of leasing. After all, we both know that leasing  is the catalyst for ensuring that closed deal, and successful profit margin!

In this present financial climate, customers will simply assume that the supplier does not offer a lease solution, and go to someone that does. Unless you clearly state on day one that leasing is available on your equipment, and that your website also reinforces this, the risk of losing the deal is higher now than ever before to someone does.

How will the credit crunch effect customers? 
Customers are experiencing the tightening of credit lines, the increase in fees charged by banks, and more security being asked to support any new loans or overdrafts.  But they still need to acquire new equipment to grow and become more profitable.

 Leasing helps them since, once the lease has commenced, it cannot be taken away or called in, unlike an overdraft, it is 100% tax allowable, and also keeps the bank overdraft for unforeseen expenditure or if one of your customers goes down owing you money.

At Oak Leasing, we do not use credit scoring, but take a comprehensive and sympathetic look to see how we can structure an acceptance for you.