Credit Crunch is not the new breakfast cereal for economists. We thought that the credit crunch was behind us, left in the grass of 2008. In films, the sequel is never as scary as the original, let us tell you now, credit crunch 2, could be worse that the first.
The reasons are simple, the debt crisis is hitting the banking system. The banks require debt, to then lend to customers. If they have little debt, they have little to lend. The cost of insuring the bonds of banks are climbing to new heights. European lenders, has been hit very hard by the almost closure of the interbank lending markets and the continuing unwillingness of investors to buy the bonds of eurozone banks. With the shadow of Greece hanging over the eurobanking market, you can understand why this has happened.
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.
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. 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.
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 forseeable future.
Credit Easing.
The Chancellor wants to get affordable loans to small businesses as the banks are patently failing. Operation Merlin has not been such a success, its intentions were good, just that the actions fell short. The Treasury is expected to unveil further details of the credit easing policy on November 29 and any policy is unlikely to take effect until next year at the earliest. Oak has the funds ready for both suppliers who need a leasing solution to sell their equipment, and critically, to customers who wish to purchase new equipment. This even applies to new starts
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.
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.
Equipment Leasing
