1. Lending to Corporate Members Eric Thompson Manager 2 Shires Credit Union

2. What I am going to cover Who am I What is a Corporate member What’s different How to assess a lending request How can we make it work General thoughts Any questions

3. Who am I Was a banker for 27 years Over 20 years lending to businesses Moved into this sector in 2004 Was CEO of Sheffield Credit Union for 7 years Was a Director of the CDFA for 4 years Became Manager of 2 Shires Credit Union – formerly Worksop & District CU in April

4. What is a Corporate Member Strict definition of Corporate is – anything not an individual e.g. Partnership, Limited Company, Charity. For our purposes it is – any lending which will not be repaid from an individual’s income from employment or benefits. It could therefore be lending to an individual for a business purpose. E.g. a window cleaner buying some ladders.

5. What’s different Repayment will not be coming from an individual’s income earned through employment or from an entitlement to benefits The money raised to make repayments will come from some other source - mostly providing a product or service at a profit

6. How to assess a lending request This is not the definitive process for assessing a request but an overview of the kind of process that will be needed. It is a completely different set of skills to those required to assess a personal lending request. It is much more detailed and time consuming

7. Where do you start You will need to see a business plan which includes:- Details of the business Details of the owner Analysis of the market Historic financial accounts Projected financial accounts

8. What do you do next Level of detail will depend on the size of the business and the size of the loan BUT You need to be sure the business can generate sufficient profit to repay the loan Other agencies e.g. Businesslink might be able to help produce the Business plan You might use a checklist to help assess the loan

9. Checklist C = Character A = Ability M = Means P = Purpose A = Amount R = Repayment I = Insurance

10. Character This area is the same as we currently do with any face to face interaction with a personal lending member Do we know them Have they been recommended Do they have any adverse credit history Have they declared it Do we think they will want to repay

11. Ability What skills, knowledge and / or experience do they have of that type of business How easy would it be to gain the necessary skills and knowledge Do they have any skills, knowledge and / or experience of running a business Do they have any transferable skills Do they understand the pressures involved

12. Means Is this a new business – if so:- Do they have other money and / or resources to put in Do they have any other backers If it is an existing business:- We need to see latest financial accounts including profit & loss and balance sheet More recent management accounts

13. Purpose Why do they want the money:-  To buy fixed assets  To buy stock etc.  To cover them until they get paid It is important they and us are clear what we are lending the money to do more so than with a personal lending

14. Amount How much do they want Have they got a definite quote or calculation Is it too much Is it too little – we don’t want to be faced with a request for a bigger loan very quickly

15. Repayment How long do they want the loan over We need to see some kind of budget which indicates the business will be profitable Are the assumption behind the budget soundly based Could they repay more satisfactorily over a longer / shorter period Profit rarely equals cash – will they have cash

16. Insurance Do we want to see life and / or sickness insurance Will what they have bought sell to repay Does the item need to be insured

17. How can we make it work Ensure you have the right skills Thorough assessment Regular contact Mentoring? Realistic charges Be aware of the potential default levels Monitor progress

18. General thoughts Don’t go into this unless you know what you are doing Might be better to use experienced partners Loans are likely to be higher value Do you have enough money to lend What proportion of your lending should be to businesses Be clear which type of loan you are doing

19. Any questions Eric Thompson 2 Shires Credit Union Queen’s Buildings (Annex) Potter Street Worksop S80 2AE Tel: 01909 500575 Email: manager@2shires.org.ukmanager@2shires.org.uk