Article 42 – Taking a loan is fine but if you can’t pay back…

HAVING gone through a few recessions and occasional global financial crisis in my lifetime, I have seen enough suffering by genuine business owners and their families.

When the going gets tough, the banks call in the loans and their cash-strapped business just fold up. The bank will then sell their pledged collateral and sue them till they are declared bankrupt. Standard operating procedures (SOP) for the bank and SOBbing by the poor chap.

Then you have property speculators and big-time stock market manipulators bankrolled by greedy bankers until the bubble burst and the market crash. All hell will break loose as all parties scramble to damage control mode. The cash rich speculators will survive but the bankers always end up with having to take an unwanted haircut. High margins come with high risks. Fair game.

To get a loan, small businessmen have to charge to the bank whatever properties they have as collateral. At all times, they have to sign a personal guarantee too, just in case the bank cannot fully recover their loan sum from the forced sale of the property.

Unless you are someone special with VVIP status, the bank will come after you. Trust me, bankers are sticklers to SOP and they will make sure your name appear in the classified pages for bankruptcies if you don’t pay up.

So, I am sure everyone is watching with great interest the latest promise in parliament by our Agriculture and Agro-based Industries Minister on the full recovery of the RM250mil loan from the National Feedlot Corp.

It looks like there were no properties charged to the Government as the 600ha in Gemas was leased from the Negri Sembilan government for RM200,000 a year and the condominiums were bought with the loan money. Did the borrowers provide the Government with any personal guarantees?

As with all loans, recovery of the loan sum will start with a demand letter saying that the bank/government is recalling the loan and you are given three months to pay back in full, principal sum with interest. Or else they will take you to court and sue you. Once they get judgement against you, the court will appoint a liquidator to salvage whatever assets you have and sell whatever cows and bells left to any interested cowherd with a big haircut. If you have signed a personal guarantee, you will be a bankrupt. Nothing personal, just SOP.

Now you are really on your own, with nobody to turn to. All your so-called friends are avoiding you like the plague. What can you do?

As an experienced restructuring expert and part-time lipstick salesman, my advice to you is not to hire sleazy advisors to solve your problems or you will end up suing him for unsatisfactory service levels filled with lies and empty promises.

There is no bypassing the SOPs. When the shit hits the fan, it is every man for himself. You still have to pay back… in full. Stay calm and meditate and God will show you the way.

First step is to look for a friendly tycoon who can buy over the cow business for RM250mil in the name of national interest. It is only petty cash to the tycoon but it will blend in nicely into his portfolio of staple food businesses.

Do not worry if nobody wants to talk to you now because the concerned ministry is already talking to a few parties for a friendly takeover. Maybe an attractive haircut might work.

If the first step doesn’t work, I suggest you take the next step with caution. You can borrow RM250mil from Ah Longs but make sure you pay the high interest rates or your house will be splashed with red paint and your neighbours will know about your non-payment. That would really be embarrassing.

Ok, maybe that was a wrong step to recommend. As a last resort, when in court, plead ignorance, blame everybody else for your ills. Be a man like William Hung, admit you have no experience and you did not know a bull from a cow. Since you have not signed any personal guarantees, they will only take whatever is left in the company which should be fine with you. It was never yours in the first place.

My simple advice to entrepreneurs who need bank loans to expand the business, make sure you treat the approved loans with utmost respect. The loan officers have put their heads on the chopping block when they recommended your loan application.

If you failed them due to mismanagement and misinformation, you can bet your last dollar they will come after you and make sure your next four generations will continue to pay your debt.

Oh yeah, another piece of an advice. Do not wear V neck pink t-shirts when you meet your bankers. Just play it straight.

There are just too much bullshit raining down on our heads nowadays and we do not need another downpour.

3 thoughts on “Article 42 – Taking a loan is fine but if you can’t pay back…

  1. life of a banker officer
    he is given a loan quota to fulfill
    a high quota every year but not his pay
    loans are given out but once loan failed, he gets sacked
    loans given but not upto quota, he gets sacked too
    how, give loan freely then
    his mgt get scott free
    chasing their dreams and causing miserly down the org
    putting high quota down the org, so they can and exceed the low quota set by shareholders

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  2. There is a saying : ” There is no free lunch. ” If you get a loan, you just have to repay that loan, big or small.Whether you are a big shot or a small shot, the bank’s simple rule: gte back the loan, and with interest! A bank would have broken the first cardinal rule of giving out a loan.American President Abraham Lincoln and his business partner took a loan; but the business failed, when Lincoln was just a wood -splitter living in a wooden cabin. But he paid back every cent! That is integrity at play!As an entrepreneur, you play by the rules of the game; an d must be honest. You don’t take a loan and disappear!
    While companies thinking of “branding ” to promote business and attract customers, the best branding is YOURSELF, your name. Joe Girard, the greatest car salesman in the world ( his name appears in the Guinness Book of World records for 11 years running !) wrote four books; and one of them is entitled ” You can sell anything ” by selling YOURSELF. Your name is your brand. You are not selling a product; you are selling yourself! TRUST us very important. If people trust you, they will buy your product! If people do not trust you, they will never buy from you, no matter how you package it. I know of one housing developer who could not sell his houses! Why? Because they do not trust him! If you look at advertisements, several developers paint a glowing picture of their houses ; but they either do not set their prices or place them at the bottom of the page in very small print! Very often, I have to use a magnifying glass to look for the prices!Just recently, I could not see the prices and rang up the advertiser; and aske dhim why the ;price tag was not there! Why be scared of putting up the prices in bold type? If people are not interested,because the prices are too steep, they will not disturb you! And you save time answering calls! The Housing Ministry has not bothered to call up developers why they are not putting the prices in bold type!Is the Ministry sleeping? Can you trust them ? Trust must be earned! With the General Election drawing nearer, will voters trust those who abandoned ship and jumped onto another ship for selfish gain? Those who ran away cannot be trusted; and will never get my vote! I am sure many voters will also not trust such traitors! The anti-hopping law ahould be passed. Let us not have any bullshit about “freedom of association ” . Voters will also have the freedom to throw them into the dustbin! Do we have the Article in the Constitution that says ” freedom to be dishonest; the freedom to cheat or deceive the voters ? ” One Government Minister disagreed with the then PM Dr. Mahathir; resigned his post, , vacated his Johor Baru seat and contested as an Independent against BN; and won! That man is Datuk Shahrih Samad! I can trust him 100%

    Thank you.

    S.H. Huang

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  3. Occasionally you might get lucky as there are senior bankers who love those who wear V-neck pink Ts. If you are real, trust your instinct. 🙂

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