. The bank lends to gain wealth from you. Bankers are better at it than borrowers because they do it all day every day. Don’t expect the bank to look after you. Bank staff are paid to make money for the bank, not for you!
Bankers are fishing for borrowers’ business to make up for their huge penalties for misconduct.
Now might be the right time to a little loan fishing yourself. GBAC’s Good Banking Advice Centre, offers you the ability to sound out other banks than the one you are with – as insurance against foreclosure.
We have learned that other banks welcome new customers with open arms, whereas your old bank knows you warts and all and can be less enthusiastic.
Another good alternative might be one of the following:
A government Drought loan might be a good bet to replace an existing bank loan, if you can get it and fund repayments. Limit is $100,000 and it is interest free over 7 years.
Before applying, work out how you will fund the $14,500 annual repayments in bad times. Work out whether you would pay it monthly, quarterly, half-yearly or yearly or after some particular sales.
Even though it is interest-free, it is still repayable debt, so handle with care.
A government infrastructure loan over 20 years @ 2.5% is also a good bet for much the same reasons. Again it is a repayable debt so don’t borrow unless you are sure you can repay it. Every $100,000 you borrow will need $7,500 a year for 20 years including $2,500 interest .
Specialist borrowing consultant Greg Bloomfield has fired a broadside across the bows of aggressive bankers just waiting to foreclose on businesses and farms whose loan repayments have been prevented by the devastating consequences of Corona virus restrictions.
Mr. Bloomfield, a former FCA, CPA, business owner and farmer says his loan consultancy has developed 20 defense strategies for borrowers harassed by banks. His firm, GBAC, has helped borrowers Australia-wide who are in strife with banks, since deregulation in the 1980’s.
He said today “ There is no reason in the world why borrowers should suffer loss of their life’s savings, homes, businesses and farms while bankers earn billions and their executives earn million on the back of policies that are at best doubtful and at worst criminal.
Government restrictions have prevented the devastation of our community by this corona virus which has killed so many people in other countries. Banks need to share the financial burden just like the rest of us.”
He claimed that with patience on all sides and good financial discipline it would be possible to tailor good solutions that would benefit both the bankers and the borrowers, saying “ GBAC will not allow borrowers to be bullied and brow-beaten by brutal bankers.”
Mr. Bloomfield is also well known in political circles as the founder of FairGO, the Votergram service and Voters Network , all of which put him in an ideal position to protect borrowers.
Realising that the constant reduction in interest rates by the Reserve Bank has not stimulated the Australian economy to counter the recessions, the Federal Government has sensibly opted for fiscal policy to directly stimulate the economy by spending money.
The Business Council of Australia has been active in telling the government that money should be direct to them so that they can create jobs.
Now there is a need for voters to tell the government what jobs they want created perhaps rural and city doctors, nurses and hospital jobs; teachers and teacher training; competent aged care staff with high skills in caring and communicating; police; domestic, family & sexual violence court staff and judges, school counsellors. Perhaps affordable housing for sale on long term multi-generational loan plans so that the residents end up with an asset instead of just enriching developers.
Just moving away from the normal topic of debt – a word on super.
Wealth managers are telling lies to young people or at best distorting the truth in their quest to obtain the lucrative superannuation money on which they build their stratospheric profits and salaries. Fund managers are the real beneficiaries of compulsory superannuation.
They cheat by talking of how much a young person would lose in the long term by withdrawing $10,000 from their superannuation now (around $15,000 say some), but do
not take into account discounted cash flow. The use of their $10,000 now may be far more valuable than it would be in 50 years time. For instance a house bought 50 years ago in Sydney for $16,000 is actually now worth about $1.6 million. That is 100 times as much.
$10,000 spent now may help provide enjoyment for the next 20 years. Having it at 30 might be a lot better than havi
ng it at 50. But saving has great benefit too, because it can be very handy when needed, like now during the pandemic.
There is a distinct possibility that the value of superannuation invested on stock markets around the globe may deteriorate because the current prices may be inflated by the mountain of superannuation money globally looking for something to invest in.
In my view the very best superannuation any person can have is their own home. They get the capital gain of
owning the house plus the benefit of living in it too. It is sort of like having your cake and eating it too.
On compulsory superannuation’s impact on jobs, big business leaders are interested in two things, maximum profits and the highest salaries they can personally earn. Increased superannuation, payroll tax and lower company tax rates (meaning lower tax deductions for wages), all make computers, robots and cheap foreign labour a profitable alternative to providing Australians with jobs.
Australians concerned to see their finances remain at least as good as they were before the pandemic, should join Voters Network Australia or FairGO to persuade their politicians to make that happen. It is not so difficult. It just takes time and effort. FairGO is an expert at the diplomacy, psychology and strategy that give incredible power and influence to everyday Australians & their organisations.
If they want a second opinion on financial matters, help with borrowing, loan management or securing a debt write off of unreasonable debt, they can contact a Borrowing Advocate or Assistant at GBAC.
Farming wisdom says costs are mostly fixed, so run as many stock as possible and it will produce the highest profits. Government calls that “increasing productivity”. I did that in my early days but then changed tack after listening to others and applying my Chartered Accountancy brain to it. Accountants are most interested in the bottom line – the profits you have to spend in return for running your farm. That is as much affected by stocking rates and debt levels as by seasons.
The problem is that farmers compete with each other in the saleyards and many other aspects of farming, including stock carried. The more stock they run the more it does in fact cost them to run the farm AND the more stock they turn off. That means more meat on the market. As the market is reasonably static, that causes prices to fall and profits fall with them.As a farmer I am interested in two things – the wellbeing of my stock and profit, or the return on my investment in the farm. So I run well under the standard stocking rate. Perhaps 60% – 80%. Many costs do in fact fall, perhaps because the place does not run at such a frantic pace and there is not the same pressure on everything.Although we could store over 20,000 small bales of hay and used to do so, feeding out through winter, I changed that after one of Terrey McKosker’s “Grazing for profit” courses. I sold our three tractors, stopped growing Lucerne, stopped storing hay or fuel of any kind and decided to run only the number of cattle that could do “smorgasbord” or grazing only.In one big move, I cut turnover by 50% and costs by 90%. It made good, debt-free profit and was much more enjoyable to run the farm.
I don’t say it would work for everyone but as you recover from “drought flood and fire” you could try selling more stock as you reach 80% of what you would normally carry. By carrying more stock we keep more cash profit locked up , mostly in breeders. Sounds like good conservative policy. However, because it does not produce cash from the sale of those extra breeders or others held, we might have to borrow more from the bank or do without the money. It perhaps depends on savings.
The most destructive factor in farming is not drought, flood or fire, but debt. Interest and charges are outrageous but worse it is like getting stuck in a bog. The harder you try to get out, the deeper in debt you get. A seriously bad season or price collapse can turn manageable debt into a long term financial disaster. Our most satisfying and productive work in GBAC is rescuing farmers from the bog of bank debt. Sometimes we use a financial rope and sometimes a “snatch’em strap”. Either way they are pretty happy afterwards.
If those extra breeders and their progeny held back to build numbers have to be sold in drought conditions, which often happens, then the prices are pretty ordinary compared to if they are sold at the end of a wide-spread re-building phase or even in a normal season. So the same cash does not flow in.
When you do try these sort of exercises to see the impact on profit, examine your financial statements with someone who can analyse them properly for you to see what the result was. Figures can be very misleading and plenty of farmers are misled even more than they try to mislead the tax office. Get a financial analyst who knows both accounting and farming to work on what your accountant prepared for the ATO and see what surfaces. It can be very revealing.
Farmers who want to make good profits have to focus on profitability all the time. Many farmers focus on the appearance of their stock, homestead, yards, vehicles and fences, which has just the opposite effect on profit. Profit comes from maximum income with minimum expenditure. There is a sweet spot to deliver good profits and pleasant debt-free farming. It takes some finding.
There is hope for those with ears to hear and the will to act. Many will do neither and just go under quietly.
Loan crises are not just caused by the Coronavirus. They have been caused by a world economy awash with unaffordable debt sold to borrowers on the basis that the good economic times would roll on forever.
Sadly that is not going to happen this time. The virus comes on top of severe drought, unprecedented bushfires followed in some places by floods and an economic downturn globally.
When disaster strikes the best course of action is swift, sure and certain. Same with debt. The time is right now to start working out what you are going to do about your loans if it may not be possible to meet future payments on time. When banks give borrowers a repayment holiday it is still a default and can work badly later. Of course interest still builds up.
Coming to a private, negotiated solution is always best. What banks offer publicly under government pressure is not the best they can do because thousands will take it up. What GBAC negotiates for you is likely to be the best because nobody else will be receiving it. The time to negotiate is before you cannot make repayments, not after you stop making them when your credit status has fallen.
Your best bet may be to give a GBAC senior consultant a call on 0428 417 496 to see whether they may be able to help you. Check out the website anyway. They have operated Australia-wide for about 50 years.
What implication does Nab’s new Chief, Ross McEwan’s plan to “teach bankers how to be bankers” have for business, home and farm borrowers with nab or any other Australian bank when the corona crisis ends ? Check it out at https://gbac.com.au/blog.php
If you are one of the 400,000 bank borrowers on a temporary relief plan, now is the time to think about what to do when the covid restrictions are lifted.