Financial Health Check required?

by Jardine Media on 16 Oct 2008 With the global share market bucking like an out of control bronco, it’s a good time to sit down and work out where you can save a few pennies. Call it a financial health check, or call it a re-evaluation of your current business debt arrangements, it all boils down to taking a hard look at your own financial portrait: and be honest, do you see the monetary equivalent of Dorian Gray in the mirror? Have you made a deal with a lender that doesn’t have your best interests at heart? If so, it’s the perfect time to call Finlease.

Finlease is a specialist finance company that acts like your insurance broker, but in the business debt area as opposed to insurance; let them know your equipment, property or business debt requirements and they’ll search out the best loan product from over twenty different finance providers. Then it’s up to you whether you choose to go ahead with the loan or not. If you decide not to go ahead, there’s no charge, no obligation and no pressure- it’s a free service.

But Finlease is much more than just a loan agent, over the years they’ve grown into something akin to a private bank. They can look at your existing credit structures and potentially find ways that you can restructure them to make some significant savings.

Finlease principal Mark O’Donoghue said that one of the most common challenges facing his SME clients (small to medium enterprises) was being too time poor to ‘shop around’ for the optimum finance arrangements. He commented that people will spend time sourcing raw materials at the lowest price, keep a close eye on their suppliers and staff but often won’t pay the same attention to their supply of credit.

‘Supply of finance/debt is just like supply of raw material. Money should be obtained in the same mentality as any other raw material. It should be sourced at the right price, with the minimal level of conditions around it and with ease of use.’

He said that the current international economic crisis means that it’s imperative that businesses sit down and have a hard look at their bottom line.

‘In buoyant economic times, when things are going robustly, companies don’t think too much about their financial circumstances because the top end is running along so well. But in light of the present financial circumstances (where banks are probably being a little harder to get along with and wanting more margin and a few more conditions) it’s an ideal time to have a look- do a quick health check to see if you have the best kind of structured facilities in place.’

‘It is a good time to look at suppliers, including your lenders, to ensure you’ve got the right structure going forward- the right structure not only in rate, but also in the terms, flexibility, conditions and the securities that you have to provide.’

‘Ask yourself ‘are you giving away to much security for what you’re really getting in return?’ It’s a good time to see not only if you can save a few dollars on the bottom line, but also put yourself in a better position in terms of controlling your own destiny and ensuring someone else doesn’t control it for you.’

O’Donoghue observed that a second problem that kept cropping up amongst his SME clients was a kind of power imbalance that happens when they have all their loans with one bank or finance provider. He uses the analogy of the ‘bad marriage’ to describe a situation where a business person has been with one lender for many years, the relationship has deteriorated or is unsatisfactory, but the person thinks it’s too expensive, time consuming and stressful to leave.

‘If you’ve got all of your things with one bank, you tend to find that the tail wags the dog…We spread our clients’ requirements over a number of financiers so they don’t have one bad marriage- they have a series of good relationships.’

O’Donoghue reports another common SME problem is that many businesses are not of the size where they have the luxury of employing a person whose sole role is as CFO (Company Finance Officer).

‘One of the dilemmas with SMEs in particular is that although most organisations are very good at what they do – it might be building masts or it might be importing furniture – they don’t have the luxury of a really high level switched on CFO.’

‘(It makes a huge difference to have) a CFO who has the ability to spend their time looking through the market, discussing opportunities with financiers to see what the best outcome could be for them. And that’s a role that someone like a broker plays because we spend all day in that market.’ No different to the role an insurance broker plays in their respective discipline.

A key aspect of Finlease’s service is this advocacy role- they will negotiate on your behalf with a range of lenders to ensure that you walk away from the table with the best outcome. Once you have provided them with your financial information it’s easy for them to approach a range of lenders and argue your case. If they can’t get the arrangement they want, they simply approach another lender. It’s a dynamic that facilitates competition between lenders while driving a higher standard of customer service across the finance industry.

‘We’ve have clients that we’ve had for twenty years. We’ve financed everything that they require; we’ve done all of their machinery, all of their property finance, all their motor cars and if they needed debtor discounting we’ve done that too. We’ve pretty well operated as their entire bank…’

A final problem that SMEs commonly report, though it’s something that happens at all levels of commercial operation, is the situation where a lender provides financial structure or solution that may not always be in the client’s best interest. At the end of the day, the lender’s responsibility is to their organisation and this may result in a potential conflict of interest where the solution offered is not always the best available on market, including through alternate sources.

Although Finlease is known primarily as a marine industry financier, boat loans only make up 10% of their annual turnover. O’Donoghue started Finlease back in 1989 as a machinery and equipment financier for manufacturing companies and now has an annual turnover in excess of $300 million. To many of Finlease’s long term clients the company has become something like a private bank, with the benefit of access to the broader finance community and the power of strong advocacy to ensure the right outcomes.

And to many of their recent clients, approaching them during the upheaval of the global financial storm, Finlease has provided sound options in a time of chaos.

To start your financial health check and to see what Finlease can do for you, see http://www.finlease.com.au or call the friendly Finlease team on 1800 358 658.