Who is your Mr Sidlow?

 I have taken the liberty of reproducing below an extract from James Herriot's book 'It shouldn't happen to a vet'.

It struck me that most of us have at least one Mr Sidlow in our books, and in some cases they form the majority of our clients.

In our industry a standard Mr Sidlow will go something like this:

Phase 1. Cashflow isn't looking too good, but if I juggle a bit we can get through it.

Phase 2: Better go to the bank to extend my overdraft (in better days).
.
Phase 3: Getting close to the overdraft limit, better stop a few payments and try to chase some money in.

Phase 4: This is really getting quite bad - got a few court orders and creditors are really pushing.

Onions up the rectum will include: Lying to HMRC, selling leased equipment, sending cheques that will bounce, starting a new company in an attempt to open new trade accounts, hiding under the desk.

Finally: Call a finance broker; look at them accusingly when they ask for bank statements. Say you don't have any adverse credit.

When they are finally presented with bank statements full of returned items and 10 CCJs within a month, you will be fully justified in your view that finance brokers are useless - they couldn't help when you needed it!

Fortunately we only have a few, but they do make life more colourful!

By the way, I left the final para in just because it amused me.

Vets are useless creatures, parasites on the agricultural community, expensive layabouts who really know nothing about animals or their diseases. You might as well get Jeff Mallock the knacker man as send for a vet At least that was the opinion, frequently expressed, of the Sidlow family. In fact, when you came right down to it, just about the only person for miles around who knew how to treat sick beasts was Mr. Sidlow himself. If any of their cows or horses fell ill it was Mr. Sidlow who stepped forward with his armour of Sovereign remedies. He enjoyed a God-like prestige with his wife and large family and it was an article of their faith that father was infallible in these matters; the only other being who had ever approached his skill was long-dead Grandpa Sidlow from whom father had learned so many of his cures. mind you, Mr. Sidlow was a just and humane man. After maybe five or six days of dedicated nursing during which he would perhaps push half-a-pound of lard and raisins down the cow's throat three times a day, rub its udder vigorously with turpentine or maybe cut a bit off the end of the tail to let the bad out, he always in the end called the vet. Not that it would do any good, but he liked to give the animal every chance. When the vet arrived he invariably found a sunken-eyed, dying creature and the despairing treatment he gave was like a figurative administration of the last rites. The animal always died so the Sidlows were repeatedly confirmed in their opinion - vets were useless. ….

it was an uncomfortable relationship because Siegfried had offended him deeply on his very first visit. It was to a moribund horse, and Mr. Sidlow, describing the treatment to date, announced that he had been pushing raw onions up the horse's rectum; he couldn't understand why it was so uneasy on its legs. Siegfried had pointed out that if he were to insert a raw onion in Mr. Sidlow's rectum, he, Mr. Sidlow, would undoubtedly be uneasy on his legs. It was a bad start but there were really no other available vets left

The truth about Dragon's Den

Following on from my previous post, the most misunderstood of all forms of business funding is Venture or Angel finance - and I'm afraid that Dragon's Den must take a large part of the blame for this.

At a recent networking event out of 30 delegates no fewer than 4 made a beeline for me to discuss an 'investment opportunity' (why does the word opportunity now make me shudder?) for one of my Venture or Angel contacts.

Similarly, the pages of business forums are riddled with posts along the lines of 'I have a unique online concept and just need £100,000 to launch it'. The responses will either take the form of (faux Scottish accent) 'so you're valuing your unlaunched business at £ 1 million - I'm out'  or a more practical, but ultimately equally useless 'All you have to do is contact the BVCA'. BVCA is the British Venture Capital Association - approaching them for investment in your 'unique new online concept' is about as appropriate as contacting Ford Motor Company in Detroit for a new filler cap for your Mondeo.

My role here isn't to tell you how to put a VC proposal together - I'm not a VC broker & that is their job, but to help you put this market in perspective here are some pointers:

• If you email your proposal to Peter Jones it is highly unlikely he will look at it. I don't know his specific stats, but  a safe assumption is that fewer than 1% of proposals to hit his inbox will be read beyond the first page (not by PJ). Of that 1% less than 1% will make it to any sort of serious consideration.

• VCs don't negotiate - at least until the very last minute. If you put a silly valuation on your business they will just move onto the next one.

• Most VCs have sector specialisms so if you want your retail/cafe business to get the right audience, you'd best find out which VC specialises in that sector.They will use their experience to question your assumptions.

•  VCs make big losses and big profits. They will aim for a return of something like 5 times their investment from your business.

• VCs buy primarily into people and businesses, so if you can turn your concept into a business - however small, you will dramatically improve your chances of investment.

• VCs don't just give you money and walk off, they expect to have feedback and input to your business.

Really what this boils down to is you need to ether do a hell of a lot of research before punting your deal around the market or you need to tap into some experience and knowledge. Just like business really!

Oh - and the truth about Dragon's Den? It isn't real. It is a cross between reality TV and Sitcom.

Business funding - the Government must do something!

Let me guess your reaction here - is it something along the lines of 'great - we can all start a crusade to get the Government to force banks to lend to small business'?  If so, I'm afraid you will have to fight that one on your own.

My point here is quite different - perhaps even the opposite; that our Government have totally missed the opportunity to reset the lending platform where it should actually be and have instead gone in for tokenistic gesturing by banging on about 'forcing banks to lend' and recruiting Lord Sugar as its 'Enterprise Tsar' (what the hell does that even mean?)

Don't get me wrong, I've nothing against Big Al, he has achieved a lot - recruiting him 30 years ago would have been a piece of visionary genius - however he is now a TV personality and property developer who has almost certainly not filled in a VAT return or had nightmares about the usurious Companies House late-filing penalties for many, many years. Ironically it is probable that his HR people have also taken all responsibility for hiring and firing. So from a 'hands-on' perspective, he now has more in common with his paymasters than with a new small business.

What is my perspective on this? I hear you ask:  Firstly, lets be clear that as a finance broker I earn money from matching borrowers to lenders. I will even confess that businesses which are struggling a bit can be an opportunity for me so in theory I should be banging the 'force banks to lend' drum. However, having served an apprenticeship of nearly a million years I am, for the first time actually feeling a degree of sympathy for lenders. Why? because - fueled by a false sense of confidence, prospective clients seem to have lost the willingness or ability to produce coherent information to underwrite a deal properly. When asking for information the reply will generally be along the lines of 'what do you need that for?'

There are 3 potential reasons for this:

1. The information is bad. I am half expecting this and will - as subtly as possible - explain that.
2. Someone else has offered a package without asking questions. Most unlikely - its not a big market and it is no secret that  lenders are cautious.
3. They have been fed an expectation that money should be forthcoming without them having to make an effort.

And this third point is where everyone - Government, banks, business advisors - all have a role to play. It is all about re-educating business (and indeed private individuals) on how to borrow. I'm not that old (am I?) but in my time I have seen the buying motivation for leasing change from 'who can understand my business & give best advice?' to 'who can do it quickest and ask fewest questions?'. Hardly a basis for sensible lending or borrowing is it?

I have previously promised that this blog will be about helping businesses to borrow - I'm afraid that will involve some harsh truths, not just platitudes.

Government ministers who happen to be reading - wake up! Drop the 'force banks to lend' crap and do something intelligent to help small business!

Business Finance - a customer's perspective.

In researching for my business start-up courses, I spent rather too much time lurking around various business forums, mainly to get an insight to the questions starter-ups were actually asking. As one will I tended towards the topic of of personal interest - that of business finance. The questions and answers were in some cases quite frightening!

Outlined below is my somewhat flippant take - sort of 'my view of your view' of business finance terms.

Types of finance:

Overdraft: This is the core business lending tool - everybody should have one! A useful pot of free cash to cover purchases from paper clips to computer systems (and sometimes cars and capital equipment). When the pot is full, your bank manager will simply poor its contents into a business loan and you can start all over again. Also very useful for deposits on buy-to-let properties. (note: the overdraft is not really borrowing, more a status symbol to show how much your bank managers likes you).

Business Loan: One size fits all. Mainly used for new starts, struggling business and as a receptacle for full overdrafts.

EFG Loan: It's guaranteed by the Government, so they have to approve it.

Commercial Mortgage: Used for commercial premises and buy-to-lets. All your lender will need to know is how much deposit you have (see overdraft) to establish loan to value. Repayment is not important.

Factoring / invoice discounting: Instruments of the Devil. Only ever used by companies that are about to go bust. Plus your customers will hate you.

Hire purchase / Leasing: Mainly used for cars and big machines. The dealer will sort it for you.

Venture / angel capital: Easy, free money.  All you have to do is chat for a few minutes to some wealthy investors. If they try to interfere in how you run your business, ignore them. Oh, and don't let them nick their money back when you come to sell after all your hard work.

Grants: Easy, free money, readily available, particularly for random start-ups (to be on the safe side, best to describe it as a 'revolutionary on-line concept'). All you have to do is ask around and fill in a few forms.

Trade finance: Used for stocks. Anything from baked beans to motorcycles.

Refinance/remortgage/sale and leaseback:  I'll tell you what it's worth and you lend me 80% of that amount.

Credit Cards: If all else fails, use credit cards. You can juggle interest-free ones for years.

Terms you need to know:

Deposit: The core component of borrowing. For business loans and overdrafts the bank are obliged to match any money you put in. For other products, if the lender says no, you can simply offer a bigger deposit (see overdraft and credit cards) and they will approve.


APR: The only stat you need to know to establish cost, value or appropriateness. The APR on a commercial mortgage is lower than on credit cards, therefore a mortgage is better. End of.


Personal guarantees: In the unlikely event that the deal is declined even though you've offered a deposit (or if your overdraft or credit cards won't stretch to a deposit) you can offer a personal guarantee. At this point the lender is legally obliged to accept the proposal. If it all goes wrong, you can post on the legal section of a forum to get out of your guarantee.

Adverse credit: If asked whether you have any adverse credit (eg CCJs) say no; they probably won't bother checking. In the unlikely event the lender comes back with details of CCJs., look perplexed, promise to investigate and blame it on a bookkeeper/accountant/office manager you had to fire.

I hope you enjoyed this light-hearted ramble; next week we will take a more serious look and try to help borrowers to recognise the right products and to present a proposal in a lender-friendly manner.