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Lending to Corporate Members

Lending to Corporate Members. Eric Thompson Manager 2 Shires Credit Union. What I am going to cover. Who am I What is a Corporate member What’s different How to assess a lending request How can we make it work General thoughts Any questions. Who am I. Was a banker for 27 years

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Lending to Corporate Members

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  1. Lending to Corporate Members Eric Thompson Manager 2 Shires Credit Union

  2. What I am going to cover • Who am I • What is a Corporate member • What’s different • How to assess a lending request • How can we make it work • General thoughts • Any questions

  3. Who am I • Was a banker for 27 years • Over 20 years lending to businesses • Moved into this sector in 2004 • Was CEO of Sheffield Credit Union for 7 years • Was a Director of the CDFA for 4 years • Became Manager of 2 Shires Credit Union – formerly Worksop & District CU in April

  4. What is a Corporate Member • Strict definition of Corporate is – anything not an individual e.g. Partnership, Limited Company, Charity. • For our purposes it is – any lending which will not be repaid from an individual’s income from employment or benefits. • It could therefore be lending to an individual for a business purpose. E.g. a window cleaner buying some ladders.

  5. What’s different • Repayment will not be coming from an individual’s income earned through employment or from an entitlement to benefits • The money raised to make repayments will come from some other source - mostly providing a product or service at a profit

  6. How to assess alending request • This is not the definitive process for assessing a request but an overview of the kind of process that will be needed. • It is a completely different set of skills to those required to assess a personal lending request. • It is much more detailed and time consuming

  7. Where do you start • You will need to see a business plan which includes:- • Details of the business • Details of the owner • Analysis of the market • Historic financial accounts • Projected financial accounts

  8. What do you do next • Level of detail will depend on the size of the business and the size of the loan BUT • You need to be sure the business can generate sufficient profit to repay the loan • Other agencies e.g. Businesslink might be able to help produce the Business plan • You might use a checklist to help assess the loan

  9. Checklist • C = Character • A = Ability • M = Means • P = Purpose • A = Amount • R = Repayment • I = Insurance

  10. Character • This area is the same as we currently do with any face to face interaction with a personal lending member • Do we know them • Have they been recommended • Do they have any adverse credit history • Have they declared it • Do we think they will want to repay

  11. Ability • What skills, knowledge and / or experience do they have of that type of business • How easy would it be to gain the necessary skills and knowledge • Do they have any skills, knowledge and / or experience of running a business • Do they have any transferable skills • Do they understand the pressures involved

  12. Means • Is this a new business – if so:- • Do they have other money and / or resources to put in • Do they have any other backers • If it is an existing business:- • We need to see latest financial accounts including profit & loss and balance sheet • More recent management accounts

  13. Purpose • Why do they want the money:- • To buy fixed assets • To buy stock etc. • To cover them until they get paid • It is important they and us are clear what we are lending the money to do more so than with a personal lending

  14. Amount • How much do they want • Have they got a definite quote or calculation • Is it too much • Is it too little – we don’t want to be faced with a request for a bigger loan very quickly

  15. Repayment • How long do they want the loan over • We need to see some kind of budget which indicates the business will be profitable • Are the assumption behind the budget soundly based • Could they repay more satisfactorily over a longer / shorter period • Profit rarely equals cash – will they have cash

  16. Insurance • Do we want to see life and / or sickness insurance • Will what they have bought sell to repay • Does the item need to be insured

  17. How can we make it work • Ensure you have the right skills • Thorough assessment • Regular contact • Mentoring? • Realistic charges • Be aware of the potential default levels • Monitor progress

  18. General thoughts • Don’t go into this unless you know what you are doing • Might be better to use experienced partners • Loans are likely to be higher value • Do you have enough money to lend • What proportion of your lending should be to businesses • Be clear which type of loan you are doing

  19. Any questions Eric Thompson 2 Shires Credit Union Queen’s Buildings (Annex) Potter Street Worksop S80 2AE Tel: 01909 500575 Email: manager@2shires.org.uk

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