Australian brokers are finding that rising numbers of clients are having trouble meeting their loan repayments. Many borrowers and bank managers can't recall the last downturn, meaning there's a general lack of experience in managing these delicate situations...
If this includes some of your clients, it is a great opportunity not only to assist them to avoid unnecessary financial turmoil, but also to solidify them as a client for life. It will also improve your standing with the lender. Brokers know that these problems rarely resolve themselves and can quickly spiral out of control. Here are some tips:
Before the storm
The best time to start discussions with your client's lender about a loan repayment that can't be met is before it is overdue. To facilitate this you will need to stay in regular contact with your customers and encourage them to contact you early if they think there will be a problem. This early dialogue demonstrates that your customer is on top of their finances, proactive and comfortable with being upfront with the lender.
When joining a client at a meeting with their lender, make sure they have brought vital financial information with them. Ensure that this information is professional and gives all involved an accurate picture of the situation. This means decisions can be based on the facts rather 'worst case scenarios' or a 'gut feel'.
Have a plan
Have a credible plan prepared with your client that shows which actions will be taken to get the lending back in order. This can include things such as cutting expenditure, having one borrower return to work or taking on a second job. The plan should also demonstrate how the loan will eventually be repaid in full.
If it looks like there will be legal arguments about the responsibilities or actions of either party, it can be advisable to recommend your clients to involve a lawyer in the discussions. This keeps negotiations on an even keel.
Help clients avoid a faux pas
Clients sometimes do not recognise that lenders need to be reassured, and inadvertently send the opposite signal. If your client demonstrates good will, it is less likely that the bank will escalate its actions.
Clear communication is key!
Customers often do not realise that if a lender is not kept updated they will assume the worst. Have your clients copy you in on emails and letters to the lender. Make sure you're kept in the loop on other discussions and payments by liaising with the client and the lender.
By harnessing your finance experience and strong relationships with lenders, the opportunities to assist your clients and forge stronger relationships with them today is enormous. At a time when traditional activities can yield little return, helping your customer to avoid unnecessary problems with a lender is a win for all involved.
Matthew Nolan is managing director of Provident Cashflow and host of SME Money Makers on Sky Business. He has over 19 years' experience in banking and finance. For information on inventory finance and production finance, visit www.providentcashflow.com.au or call 1800 763 012.