Marianne Eggleston
Director of the Financial Analysis Department with the her deputies
Each institution dealing with the financing of enterprises must anticipate the possibility of the deterioration of their financial standing which may render it difficult or impossible to recover the money loaned to them. Therefore, it is crucial to establish the relevant security for loan repayment.
I would like to draw your attention to the differences between the behaviour of banks and Meridian CE in crisis situations for enterprises.
The practices applied by banks show without any doubt that in case of any problems they leave their clients alone and terminate the relationship with them. Even if the relationship is not completely broken, it is dramatically transformed to the detriment of borrowers. The banks frequently call in the loans and commence the process of recovering the amounts owing to them. In such cases, the borrowers’ liabilities increase exponentially and they are no longer capable of repaying those sums. Since the claims of banks are privileged versus other entities, and those are also sufficiently secured with the borrowers’ assets, the banks are not interested in protecting the borrowers against liquidation. On the contrary, in same cases they aim at putting the enterprises in liquidation as it enables them to liquidate their assets with a fair surplus. It is a quite frequent practice of banks. Therefore, it is not an incident that in some countries associations and organisations of entrepreneurs harmed by the banking system were established.
I have witnessed some instances of co-operation between the banks and bailiffs aimed at liquidating the borrower’s assets, much bigger than the actual liabilities, and those practices breach the effective laws and legal proceedings as well as the elementary social co-existence rules. Unfortunately, the effective laws protect rather the interests of banks than the harmed entrepreneurs fight a lost battle.
The practice applied by Meridian CE in crisis situations for enterprises varies from the one applied by banks and it is based on a simple business calculation.
Meridian CE uses a lower multiplier of the required collateral versus the financing amount that the one used by banks. If the bank demands for example that the collateral value represent 300% of the loan amount, then Meridian CE is satisfied with for example 120%. Thus, the value of the required collateral may prove to be insufficient to cover the claims of Meridian CE, if any. Therefore, quite opposite to banks, it pays to Meridian CE to help the entrepreneur and make an agreement with them, rather that strive for recovering the claims by way of execution.
The practice of Meridian CE is this regard is defined in the loan agreement signed with the borrower (the client). It contains a dedicated chapter devoted to the crisis situation, and the provisions stipulated therein determine in a detailed and exhausting manner the rights and duties of both parties to the agreement as well as the binding procedure in this respect. The crisis situation was defined in detail therein. In case of appearance of some signals of a crisis situation, the borrower is obliged to inform about it Meridian CE within a specific timeframe and develop a restructuring programme for the enterprise. This programme aims at improving its financial standing and is subject to approval by Meridian CE, and after that it should be implemented by the borrower. Meridian CE offers for free the expert’s assistance in developing the said programme.
The strategy adopted by Meridian CE in case of crisis situations proved to be successful in the past and still works well. It makes it possible for the entrepreneur to recover from financial difficulties, and for Meridian CE to get back the loaned money.
However, I would like to emphasise the fact that it is not our aim to heal enterprises, but only to finance them. However, sometimes it is necessary and worth helping an enterprise to solve its financial problems. Nevertheless, an enterprise must count mostly on itself, and we may only provide it with help. Therefore, a prerequisite for overcoming a crisis situation is the enterprise’s will and determination when solving its financial difficulties. It is often a long and painful way, but it cannot be avoided. Everything has its price, both in business and in private life, and one needs to make sacrifices in order to succeed…
Director of the Financial Analysis Department with the her deputies
Each institution dealing with the financing of enterprises must anticipate the possibility of the deterioration of their financial standing which may render it difficult or impossible to recover the money loaned to them. Therefore, it is crucial to establish the relevant security for loan repayment.
I would like to draw your attention to the differences between the behaviour of banks and Meridian CE in crisis situations for enterprises.
The practices applied by banks show without any doubt that in case of any problems they leave their clients alone and terminate the relationship with them. Even if the relationship is not completely broken, it is dramatically transformed to the detriment of borrowers. The banks frequently call in the loans and commence the process of recovering the amounts owing to them. In such cases, the borrowers’ liabilities increase exponentially and they are no longer capable of repaying those sums. Since the claims of banks are privileged versus other entities, and those are also sufficiently secured with the borrowers’ assets, the banks are not interested in protecting the borrowers against liquidation. On the contrary, in same cases they aim at putting the enterprises in liquidation as it enables them to liquidate their assets with a fair surplus. It is a quite frequent practice of banks. Therefore, it is not an incident that in some countries associations and organisations of entrepreneurs harmed by the banking system were established.
I have witnessed some instances of co-operation between the banks and bailiffs aimed at liquidating the borrower’s assets, much bigger than the actual liabilities, and those practices breach the effective laws and legal proceedings as well as the elementary social co-existence rules. Unfortunately, the effective laws protect rather the interests of banks than the harmed entrepreneurs fight a lost battle.
The practice applied by Meridian CE in crisis situations for enterprises varies from the one applied by banks and it is based on a simple business calculation.
Meridian CE uses a lower multiplier of the required collateral versus the financing amount that the one used by banks. If the bank demands for example that the collateral value represent 300% of the loan amount, then Meridian CE is satisfied with for example 120%. Thus, the value of the required collateral may prove to be insufficient to cover the claims of Meridian CE, if any. Therefore, quite opposite to banks, it pays to Meridian CE to help the entrepreneur and make an agreement with them, rather that strive for recovering the claims by way of execution.
The practice of Meridian CE is this regard is defined in the loan agreement signed with the borrower (the client). It contains a dedicated chapter devoted to the crisis situation, and the provisions stipulated therein determine in a detailed and exhausting manner the rights and duties of both parties to the agreement as well as the binding procedure in this respect. The crisis situation was defined in detail therein. In case of appearance of some signals of a crisis situation, the borrower is obliged to inform about it Meridian CE within a specific timeframe and develop a restructuring programme for the enterprise. This programme aims at improving its financial standing and is subject to approval by Meridian CE, and after that it should be implemented by the borrower. Meridian CE offers for free the expert’s assistance in developing the said programme.
The strategy adopted by Meridian CE in case of crisis situations proved to be successful in the past and still works well. It makes it possible for the entrepreneur to recover from financial difficulties, and for Meridian CE to get back the loaned money.
However, I would like to emphasise the fact that it is not our aim to heal enterprises, but only to finance them. However, sometimes it is necessary and worth helping an enterprise to solve its financial problems. Nevertheless, an enterprise must count mostly on itself, and we may only provide it with help. Therefore, a prerequisite for overcoming a crisis situation is the enterprise’s will and determination when solving its financial difficulties. It is often a long and painful way, but it cannot be avoided. Everything has its price, both in business and in private life, and one needs to make sacrifices in order to succeed…
