Lately, we have been commenting on the difficulties our members have been having when trying to raise money from the banks to invest in their practices.
Here’s a (true) story from a long standing Breathe Member who has two successful practices in Southern England.
Part 1. Face to face meeting with my health care lending manager.
Me: Hi I’ve got this hair-brained scheme for which I need to borrow money, what do you need from me to be able to say “yes”?
Bank: well money’s a bit tight at the moment, we are all having to tighten our belts a bit, so we only really like lending to people who have already got the money, but for some strange reason they tend never to ask, or those with a proven track record.
Me: Oh well I don’t have the money so can I have some from you?
Bank: really, how much do you need for this wild and whacky idea? £2m, £1m
Me: oh, no not that much, £35k is all I need
Bank: that’s a lot are you sure you can afford it?
Me: Well let me see. It equates to about 2 months post tax income for me, so if the application process takes a few months I won’t need to borrow
Bank: we really like some security-what assets do you have?
Me: well there’s my share portfolio which is worth around £170k (and incidentally would be worth a lot more if the bank that likes to say “no”, had said “no” a few years back-{I didn’t say that don’t worry}), and my 2 dental practices. So in all I’m probably worth about a mil…
Bank: well no bricks and mortar so we would really need to know what this hair-brained idea is? Importing icebergs? Hadron collider in Southern England?
Me: Noooo, nothing like that, I’d like to start another dental practice
Bank: oh lets see the biz plan
Me: here you go
Bank: that all looks fine, but as I said we really only will lend to those with a track record
Me: well I bought a practice 4 years ago, immediately followed by a recession (which I might add was in no small part triggered by the banks {again didn’t really say that}). In that time I have increased profitability, I have increased turnover and I have paid off a significant chunk of the loan. I have also made the practice run with very little input from me. Let me just remind you that was in a recession!
Bank: impressive
Me: I haven’t finished yet: I have also started another practice, effectively from scratch, which also functions with very little input from me, and 5 months in has outperformed the biz plan, and in its 5th month made a small loss of £500: here look at these growth figures…
Bank: blimey that is good, I need to check with my bosses, but I think it’s a “YES”, I’m certainly going to support a “Yes recommendation”
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Part 2. 10 days Later By Phone
Bank: er Hi “hair-brained idea customer”, it appears the answer is “No”
Me: really, why?
Bank: err you’ve got too much money of ours already, the max we lend unsecured is 100k, and you have 370k…
Me: ok, so the computer says no?
Bank: err yep
Me: so the assets I have, the profitability I have demonstrated, and the track record didn’t really help then?
Bank: correct, but you could perhaps go to your personal bank, they may lend to you…
Me: ok, that’s great, incidentally my personal banking is with this bank you may have heard of, the government own 43% of it…
Bank: is that the bank that likes to say “yes”?
Me: yes it is that one
Bank: yes try them, I hear they are very generous
Me: ?!?!?!?!?
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Part 3. Next day by phone
Me: is that Graeme the manager of my personal bank?
Graeme: yes it is, Hi how are you, I had a call from your business manager he said you would be calling me
Me: fine thanks Graeme, and thank you for being one of our clients
Graeme: How can I help you?
Me: can I borrow some money please
Graeme: yes, of course how does £25,000 sound-that’s the maximum we can lend through personal banking?
Me: yep that will do
Graeme: whats it for?
Me: I want to start a dental practice
Graeme: well we can’t put that on the form if its personal lending. If you want it for a holiday, redecoration, buying a car etc. that’s fine. If you had some money set aside in the past to start the dental practice which you have spent on any of those things then we could always lend it to you to replace that money.
Me: ok lets do that, as I do go on holiday, we have done some painting and we bought a car a couple of years ago
Graeme: great pop in to the branch, sign the form and we’ll transfer the money to your account.
Me: thanks
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You couldn’t make it up…