Debt & Sensibilities

Note to self:

I had a chat with my SMEs today about growth.

Some of them have a desire to grow faster than they can achieve from profits.

But the banks won’t lend them money for a whole bunch of reasons; because they don’t fit into a pigeon hole as a business, because the banks are bureaucracies, because the debt is for investment in risky growth not working capital, because the company’s assets are illiquid, or whatever.

Unlike the banks, private lenders know that the default rate of SMEs is the lowest of all businesses and hence worth the investment.

The trick is to only give finance to great management teams. They will make it work. All you need to be able to do as a lender is pick great management teams, and to be fair to banks, they can’t afford the people that can do this.

So the core of this note to myself is; to those CEO/Founders that don’t have a board, you are either increasing the cost of your capital or reducing your access to loans simply because you are a lone wolf.

By not sharing the business management responsibilities you are adding too much ‘key man’ risk in the eyes of lenders.