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SMALL
BUSINESS
Hewitt
Announces £540k Debt Line
The Government and seven
banks are joining forces to fund a
national telephone helpline for small
businesses facing debt problems.
Under the
new £540,000 three year initiative,
businesses will receive telephone
counselling and a self-help pack
providing comprehensive guidance on
dealing with business debts.
The helpline
will be launched in July 2000 and will
also be available through the Small
Business Service (SBS) Gateway.
Patricia
Hewitt, Minister for Small Businesses
and E-Commerce, said: "Small businesses
can all too easily find themselves
facing a debt crisis. The Business
Debtline will provide expert counselling
and self-help advice in tackling
financial difficulties so that small
firms can go on to thrive. This
initiative is an excellent example of
partnership between Government, banks
and the voluntary sector." The service
will be provided by Birmingham
Settlement who have several years
experience of providing debt counselling
for small businesses in the Birmingham
area.
The service
will be funded to the tune of £180K a
year for 3 years. Government will invest
£80,000 a year and the banks will
jointly invest £100,000 a year.
Birmingham
Business Debtline was launched in 1992
to provide advice and counselling to
small businesses in Birmingham facing
debt problems. It is a division of the
Birmingham Settlement, a 100 year-old
voluntary organisation which also
operates a national debtline for
personal debts advice. Since its launch,
Birmingham Business Debtline's telephone
help and advice line has handled around
1250 calls a year, including a
substantial proportion from businesses
outside the Birmingham area.
The
following seven banks are supporting the
initiative:
Barclays
HSBC
NatWest
Lloyds TSB
Bank of Scotland
Royal Bank of Scotland
Co-Operative Bank.
The SBS Gateway will provide a means of
accessing a comprehensive national
service of information and
expert advice.
(Ed: Typical. The government is again to
throw money at small business issues
that can be addressed by existing
commercial enterprises [our web site
being one of those]. I'd love £540k over
three years: what will happen is that
businesses such as Credit to Cash will
go to the wall and the funding will dry
up for the new debt initiative - leaving
nothing in 2003.
CREDIT
EVENT
Credit 2000 - Be There to be Aware
*The* credit event of the year 'Credit
2000' will be at Olympia 2 (London) from
14 - 16 March. The event consists of a
'who's who' in UK and European credit,
and will include credit briefings from
the industry's professionals and
practical workshops. There is also 'The
Credit Summit': a fee based summit,
structured to meet the needs of senior
executives and business leaders. For
most company credit staff, from managing
director's to credit controllers, the
free Credit Briefings are more than
informative and thought provoking.
The event is
free if you pre-register before 7 March
2000, you can register on-line at
Creditevents
SURVEY
Banks Plan Net-style Ads for ATMs
HTML
applications for bank ATMs could soon
become the norm, according to a TechWeb
report. North Carolinian bank, the First
Union National is currently testing an
application, developed by ICL, which can
be used throughout the bank on cash
machines, Internet banking services and
services for mobile and wireless
devices.
ICL say that
Net-style direct marketing and
advertising on ATMs will be possible and
should be successful as banks already
have detailed financial profiles of
their customers. A bank in Spain has
already begun to sell tickets for soccer
matches through its ATMs. Other future
services could include a personalised
stock ticker running across the ATM
screen.
Downloading
time at the ATMs will be rapid as they
will be serviced by high-speed lines and
the amount of data to be transmitted
should be quite low. ICL envisage that
graphics and video will be stored
locally. Source: NUA
(Ed: Bear in
mind the latest ATM fee war (£1 - £2
'disloyalty charge' for using another
banks cash machine), when the machine is
also a marketing tool the penalty charge
could be staggering - if in fact the
banks will let you use another banks
machine at all in the future!)
TIP OF
THE WEEK
Buy
Holiday Cash Now
The £ is at
an 11 year high on European currency and
the analysts believe this to be the
peak. Downside: the lost interest
between now and your holiday and/or
volatile money markets (this aside, it
looks a good move).
SHORT
BITS
Hmmm That's Interesting
Yahoo! to
sponsor Manchester United's football
shirt, and sell United's merchandise on
the Yahoo! web site, for a deal of
around £40m. The largest ever
sponsorship in the UK
A new
government web site at
Great Place to Work is packed with
case studies, information etc. about
businesses responding to change and
difficulties in the work place.
Is AOL 5.0
trying to kill our PCs? Dubbed "The
upgrade of death" by Windows Magazine,
the latest version of AOL's free
software (AOL 5.0) is even now
infiltrating homes and offices across
the land. In a damning review of the
software, Windows Magazine catalogues
the problems it can cause and advises
readers to steer clear. Source:
Accounting Web
DoubleClick
Inc. (Nasdaq:DCLK) was sued earlier this
week by a California woman who argued
that DoubleClick has illegally collected
and sold her personal and demographic
data. "We think the court will declare
the use of cookies illegal in Texas. It
is electronic stalking. It violates the
eavesdropping statutes, and from a
civil aspect it's an invasion of
privacy," said Universal attorney
Lawrence Friedman.
A very rich
gentleman passes on, leaving his fortune
to his only living friends, a doctor, a
chief executive, and a lawyer. But being
the eccentric he was, his will
stipulated that each one must place
their third of the money in his coffin
before he is put in his final resting
place..
Over a year
later the three friends are talking over
lunch and the topic of the old man and
his strange ways comes into the
conversation. The doctor finally says "I
have to be honest, I didn't place ALL of
the money into his coffin, I kept five
million".
TOPIC
The Unfair Price of Creditt
There is an
emerging market (called, sub prime
lending) for those who have poor credit
records but who fall short of being
totally beyond credit acceptance and
risk.
To explain
why there is such a business, take this
example: The commission payable to a
financial adviser or mortgage broker
from the actual moneylender for £100,000
deal is about £250.
The
commission payable to the broker or
adviser who signs up a £100,000 deal
using sub prime lenders is £2,000 to
£2,500. Yes! 10 times more. You have
probably guessed why there is such a
difference – the interest rate can be up
to 3.5% higher. Mortgage On the £100,000
deal, an extra £3,500 is payable every
year. On a 25-year mortgage that is a
staggering £87,500 more than the average
lender. Bearing in mind that they always
have security over your (sorry, their)
property, the prolonged high interest
rate is just short of (or just about)
criminal.
Further, if
you sort your finances out after a few
years and would qualify for a mortgage
with a more traditional lender, the
‘penalty’ for redemption (changing
lenders) is again staggering.
My
suggestion:
Save, save
and save for the biggest deposit you
can. Keep out of serious credit deals
(like cars) maintain all current credit.
Push your financial adviser or broker to
get you a non-sub prime deal. Advisers
and brokers are not life long friends of
yours (regardless of how sweet they talk
to you or how much they have really
‘tried for you’ etc.): make them bloody
work for their money!
Loans
High
interest loans have always been
available: mostly from weekly door
collection lenders. Competitive loans
are only available from the major banks,
building societies and finance houses.
They have been using scoring cards for
some time (2 points for being in a job,
0 points for unemployed etc.). With
this system many of their customers have
been refused loans due to not scoring
enough points. A phone call to the bank
manager has reversed a rejection on many
occasions: not enough customers ring the
manager and question why a computer has
rejected one of the banks customers who,
although retired and renting their home,
have the means to pay the loan. Sub
prime moneylenders have already
integrated into the ‘home owner – no
equity’ market and will soon explode in
the non-home owner market.
Credit
Cards
Most people
with poor credit records will only have
a credit card if they have been with a
bank, building society etc. for some
considerable period and have managed to
hang onto it. Trying to get a major
credit card with a poor credit record
only serves to smear your name further.
Each failed attempt will be registered
against your credit file (if this is
you, do not apply for a card until you
can show a good credit account through
catalogue, store card or other non-major
creditor account, and if you can, wait
24 months).
There are a
few sub prime credit cards at present
that will take some degree of risk the
price to pay is a low credit limit (not
a problem), a yearly fee that borders on
extortion (what do you expect), and
finally an interest rate that would make
some of the top credit card companies
look charitable (yes, it’s that high). I
have no desire to get sued, and I
apologise for not naming them. Look on
any of the financial sites that give you
mortgage, loan and card rates. The ones
with the higher interest rates could be
sub prime. But, even with all the bad
points, you can operate in the real
world, order on the Internet, run out of
cash, hire a car … and you could also
pay the outstanding balance each month
to avoid the interest (ok, that’s a bit
much to ask).
Who is
sub prime
The current
credit assessment methods are not
faultless. Many good risks are rejected,
as are many people who think they are
worthy of credit. The self-employed and
smaller company director, and those who
work from home are seen as above average
risk. Changing your address, or job, two
or three times in two years are also
above average. The ‘above and below
average’ tag is a good guide when
assessing yourself. If most of your
friends and family own a home in the
area you also live in, but you rent your
home, that would be considered as below
average for that area: the demographics
(about where and how you live) are
becoming as important as your credit
record. Of course, your credit record
will always be the main indicator as to
your credit rating. A county court
judgment for £250 four years ago will
make most major lenders ‘run a mile’.
Finally, all
of the readers of this article who do
not have credit problems need not think
that they are safe from the sub prime
market. If a financial adviser or
mortgage broker thinks that you are less
than ‘financially street wise’ you too
can end up with a sub prime lender.
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