Watching question time and for the umpteenth time heard some muttering idiot (Caroline Lucas) claim growth was held back because businesses can't borrow money.
Good businesses rarely need to borrow money. A good business makes profits. A good business should raise money, when required, from it's shareholders.
We have been through an aberrant period where business has raised money from banks rather than investors.
Many big companies sold their business premises and leased them back. How mad was that? Blowing your capital and increasing your overheads, the economics of the madhouse. They deserve to go broke.
We have done everything possible to run our businesses without debt. We do not have to pay interest to the banks. We don't care what the banks think of us. We are free.
Our only concern is should we be lending to the banks? Are they a safe place for our money?
Years ago I saw a statistic, bearing in mind that 93% of statistics are invented, that said 90% of owner operated businesses had no borrowings and had savings in the bank. The only sane way to operate.
That just confirms my view of Lucas.
ReplyDeleteI have just come across your article and could not agree more. I set up my own small business in 1980 with the office in my front room. I used my wife's car (an old Volkswagen Beetle) until I was sure I had a cash flow and so on.
ReplyDeleteI had arranged for modest overdraft facilities which I did not need to use, my customers being good payers. At the end of the year I took my accounts to the bank manager to show him what we had done.
He was rather offhand. "I thought we had done pretty well" I said.
"Yes but you are not using any of my money to do it" said he.
The sale and lease back mania extends to the public sector. The Inland Revenue sold most of its prime sites and leased them back from A COMPANY IN A TAX HAVEN. (Mapeley Steps, I think it was called). We were assured it was "the best deal for the taxpayer".
However the company had to come back and ask for more rent because it could not honour the contract. When people enquired about the details of this they were told it was "commercially confidential" - I bet it was!
No doubt some former ministers and civil servants went out through the revolving door and returned as directors and consultants for the company a year or so later.
With regard to lending to the bank, I did suggest to our manager that I should take a charge on his house to secure our deposit account etc. He didn't seem keen on it but I thought "Sauce for the goose....>"
I too have asked the bank for a guarantee:
Deletehttp://disenfranchisedofbuckingham.blogspot.co.uk/2011/11/neither-borrower-or-lender-be.html