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Thread: DO YOU BELEIVE IN PAYING A DEBT WITH A DEBT

  1. #21
    Diamond Member Citizen X's Avatar
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    Yes, it doesn't make any sense! You rather finance a machine that will generate income, jobs and boost economic activity...but instead you more happy to finance a car..
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  2. #22
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    A bank is a business just like any other, its not a charity!

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    Diamond Member Blurock's Avatar
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    Quote Originally Posted by adrianh View Post
    I suppose the banks consider risk vs reward. A credit card has huge interest rates to compensate for their risk. I suppose loans on cars and houses are easier because they can grab the asset. I think the problem with machines is that small business fail so easily and that the asset only has value in a very narrow market.
    So if they need to grab an asset to justify their lending are they not just pawn brokers?

    I agree with risk and reward and I have been generalising, but often a bank will not consider the past performance and credit history of a business due to perceived risk. This is sometimes (mostly?) because they often do not understand the business or the industry in which the business operates. Because they are content to sit in their offices?

    Yet, they will grant credit to the business owner, who depends on this very business for his income!
    Excellence is not a skill; its an attitude...

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    Quote Originally Posted by Blurock View Post
    This is sometimes (mostly?) because they often do not understand the business or the industry in which the business operates. Because they are content to sit in their offices?
    hmmm...their business is money, it is not knowing the business or industry in which the other business operates.

    The difficulty in banks is due to the sheer volume of clients and transactions and the complexity of their systems decisions are largely made by systems developed over time. Those systems are not able to look at the nuances of each individual business and its inter-connection with other businesses so as to make a decision based on fuzzy logic. Decisions are hard-wired on strict criteria.

    Don't get me wrong, I'm not pro banks, I hate them as much as you do, but I do understand why they do a lot a lot of things that they do.

  5. #25
    Diamond Member Blurock's Avatar
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    Quote Originally Posted by adrianh View Post
    hmmm...their business is money, it is not knowing the business or industry in which the other business operates.

    The difficulty in banks is due to the sheer volume of clients and transactions and the complexity of their systems decisions are largely made by systems developed over time. Those systems are not able to look at the nuances of each individual business and its inter-connection with other businesses so as to make a decision based on fuzzy logic. Decisions are hard-wired on strict criteria.
    The banks do have research departments where share markets and different industries are being studied. There is even an industry analysis comparison where a business can be measured against the performance of its peers. Corporate bankers know all about this. Believe me, the better bankers always make a point of visiting their clients, even if it is once a year. They know their clients and the risks in that specific industry.

    Unfortunately it is at the lower levels and in credit departments that things sometimes go pear shaped. The available information and knowledge is not applied and often credit is awarded on a points sytem that has no bearing on the purpose of the credit applied for. Paint by numbers may apply to the demographics of the masses of individuals, but there is far more to a business than that.

    I am not a gambler, but if I had to risk money on a horse, I would want to know everything about the horse, its pedigree, past success, the jockey, his abilities and even the grounds on which they are racing. If you do not do your homework before the time, you are only gambling, and that is then why you should take additional security to cover your potentially bad decisions.
    Excellence is not a skill; its an attitude...

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