Irrespective of what our bankers try to tell us about their role as financial advisors rather than money lenders - maybe we should take that with a pinch of salt. The past week has seen 4 harrowing tales about banks suing my heroes in terms of sureties - and in most cases the sureties go back more than 10 years! Let me share just one - about a good friend of mine...
In September 1999 Colin closed his firm. At the time he banked with ABSA in Somerset West - and the firm had an overdraft, a few petrocards, as well as a 'credit line facility'. On closing he approached ABSA and asked them what he should do about the outstanding balances.
Some background. Colin had signed joint surety with a partner. Despite this he was summonsed within a few months for the entire balance - which he paid in full [about R45,000]. He also paid the outstanding balances on the petrocards. The balance outstanding on the credit line facility was R22,200, and Colin also settled R11,000 of that. This left about R11,200 outstanding. [There is some irony in all of this as Colin was lent this money by ABSA extending his mortgage bond.] Of course, The partner [isn't it always like this] didn't offer any assistance at this time.
My involvement as an advisor at this point was to insist that Colin get a written release from the sureties in return for his payment. Colin settled for a verbal assurance from his ABSA manager that by settling the surety debts he was free of any future commitments.
In February 2000, ABSA again summonsed a stunned Colin - this time for R68,531 - for the same money he had already paid them! Turns out that the funds he had paid them - completely outside of the estate of the firm - were transferred to the liquidators in error! [Such a payment in settlement of a surety is never paid to a liquidator - ever.] A few months of boxing - with an attorney between the two of them - and it was agreed that ABSA would go back to audit the irregularities in the account.
But on 7 February of this year [2003] Colin received the latest ABSA missive in this ongoing financial discussion - but this time the ABSA summons was demanding R165,000! Of course it's back at the attorneys - but it would have been such simpler to get the paperwork signed right at the beginning, instead of relying on the 'word' of the banker in question. A verbal agreement is simply not worth the paper it's written on.
The point of this story is simply that we small business owners are merely cannon fodder in the minds of our bankers, and their actions belie those generous promises that permeate their advertising. We take our businesses and our commitments awfully personally, while our banks seem only to focus on the money - without any regard for any personal relationship. If you want the full skinny, with all the details, this is posted on the Petes Weekly website as part of this article - but I do not include them here as it is much more detail than justifies a quick read. Click here to read it all.
After emailing ABSA and asking for their response, and after their initial request to delay publication by a week to give ABSA time to investigate, I received the following:
Absa has afforded this case its urgent attention and is finalising a comprehensive report. Documentation requested from the liquidator is however still forthcoming. We have an undertaking from the liquidator to have this information by 12pm on Monday [March 10th] and will submit our findings thereafter. Absa Media Spokesperson
Moral of the story - our banks are not our financial advisors. Our banks exist to sell as much money as they can, at the lowest possible risk, and at the highest possible interest rate. As business owners we forget that at our peril. Your bank is NOT your friend!
Written By:
Peter Carruthers
Business Warriors