25.10.2012 – guest blog from Lucy Haughey of The Plan B Partnership
It’s all about the money…
Microenterprises, social enterprises and new-start businesses can be forgiven for having tunnel vision around their own strategies and plans for income, but I often wonder whether CDFIs are missing a crucial point: that the enterprises they fund are often rarely supported and enabled to appreciate and respect the minutiae of commercial financial management.
Every single day I converse with charities, community interest companies, social enterprises and small private companies and every single day I am concerned by a lack of fiscal knowledge the directors and senior decision makers have around the importance and relevance of professional financial planning and risk aversion to their companies.
I’m sure that CDFIs do wish to invest in companies that are safe, secure and fiscally aware.
So do you mind if I ask how many of you ensure that the organisation for whom you are preparing for a loan, has their own commercial financial advisor for example? (This provision is not trumped by a trustee on the board who once worked for a bank!)
Do you ask if these organisations have the full set of commercial insurances? If they have contents, buildings, equipment and vehicle insurances that are current, affordable and fit for purpose? Were these insurances (heaven forbid) swiftly and without forethought just purchased online or are they bespoke plans?
Do you ask your clients if they are aware of auto-enrollment responsibilities? Are they ready for the Government’s hefty fine system if their company pension plan fails the criteria assessment? And do they have the £10,£20 or £30,000 to hand to pay for their staff pension plan to be developed if it is applied post RDR (Retail Distribution Review) after January 2013?
Do you ensure they have a “Plan B” or escape route that will protect the money you have loaned them and help them manage the payments back to you?
Do they understand commercial insolvency and what takes place if credit fails and they fall into financial difficulty? In fact, do you as CDFIs have a relationship with a good, ethical caring business debt advisor who can mediate and support both parties if things do go wrong?
To me, these questions are of critical importance and should form part of the dialogue within every single first interview you have with a potential borrower, whether he or she is a sole trader or a large employer.
So are these questions of critical importance to you?
What next?
- CDFA occasionally carries guest blogs to encourage debate and share opinion. CDFA does not necessarily endorse, share, or support the opinions of guest bloggers.
- Do you agree or disagree with Lucy? Does your CDFI address these issues? Send your views to Sam Collin: [email protected]
- Lucy Haughey is director & co-founder of The Plan B Partnership, a financial advice and financial inclusion social enterprise established in 2010.