Case Study: Forced to Sign Sureties

A delightfully well-written true email highlighting the risks inherent in running your own businesses. Our hero was doing just fine until the economic tide started to turn, and his banker is not very supportive. Such is entrepreneurial life.

Today I got my pineapple from my bank manager (sorry I meant relationship manager!) And you know what? You are right. It felt so good. I suppose because I was stretched so far over the barrel that I could scratch my nose with my toes.

But in the back of my mind your words were screaming at me:"POISON, POISON; watch out it is a SURETY FORM!" In spite of this resonance I was helpless. I was so punch drunk over the last six months' battering that I had no resistance. The hand lifted and through the fog I could see it scrawling my signature on that piece of paper. It was my hand - but not my brain.

So here I sit and reflect about your book that was given to me for my birthday in 2007. Your book that for a year and half had the sole purpose of preventing the dust from reaching my bookshelf. I have got plenty business books that do just that, and then some thicker ones that serve as book stops. I think you will be horrified with the amount of self help-books that are used exactly in this manner. Calls to mind that knowledge is not power. It is potential power, depending on how you use it.

Sorry, I am digressing. Probably still a bit battered in the head.

In any case my business was flying - why should I need a "Crash Proof" type of book? I have been with FNB since 1985 and have eighteen different accounts with them. They were my best friend in business and we had a wonderful partnership going. Or so I thought.

In 2007 I bought an additional eleven properties and the interest rates pulled an Evil Kenivel stunt and ramped into space! But I had no worries. I have a lot behind me. As a matter of fact, if I had to auction off all my property and settle my debts I would have sat with a cool R9 million in my back pocket. Oh yeah, Peter, I know what you're thinking! You know the thingy about only realising 10% of its actual value when a creditor sells it? Just remember your book was serving as a dust collector at this stage.

I was heading for the end of 2008 and every month for the last fifteen or so months I was bleeding R30 000 per month, mainly due to the higher interest rate. No worries, my partner FNB will help me no problem. I had an overdraft of R1,1 million spread over two businesses that are doing well. FNB had a R1,7 million second bond on a property valued by them for R3,5 million. And don't you believe for a second that properties are nose diving in value. This is not England!

So I sit down one night in October and work out that things will start getting a bit tight in February. Time to take a stroll over to my partner and chat to my own relationship manager. He will be so excited to help me, his friend. All I need is R 400 000 to replace the R 600 000 I had taken out of the business to subsidise my recently acquired properties. Shouldn't be a problem though, seeing as they have security to the value of R3,5 million with a second bond that is R600 000 more than my current overdraft. Piece of cake!

Piece of (something that rimes with ship!). So since October last year until today it has been a wrestling match with Medusa.

Where do I start to describe this horror movie. There are so many loose strands that leads to me accepting my pineapple with a smile on my face and a hole in my head.

Let’s start with your book. So by December last year I realise that this is not going to be a walk in the park. Here I will have to work to generate money and then go home at night to work to massage figures together to keep my relationship manager happy. Do you know how much work it takes to do a three year cash flow projection for two high volume business', a property holding cc and 16 rental properties? Do you know where I can get one of those crystal ball jobbies?

So I decide I will dust off your book and a genie might just appear. Just kidding! 

Actually me and my wife, a lady of Russian descent, were heading to her family for our annual visit. I love going in winter and it is also my business' quiet time. Your book was quite light (in weight not content!) so it was the ideal book to take with. Sorry for the honesty - but it does get better!

In the Russian steppes there are not many English speaking souls. I can only speak Russian after a couple of vodkas, so during the day I really studied your book. The more I read the more mortified I became. So much so that I ended up waking up screaming every night drenched in a cold sweat. My partner, FNB, was not my friend after all. They read all the bad parts in your book and applied Kaizen to it. They perfected turning us into the living prey like wasp stinging a spider into submission so that it’s offspring can devour it alive 

Back in good old RSA I suggested that they give me a R 1,7 million rand bond and kill off the overdraft. Time to get rid of those sureties. Guess what, you are right, they don't like it! So instead, they really drag the whole matter out whilst taking their time. The more they deprive you of your business' life blood, the more they weaken you.

For good measure they bounce a couple cheques and suddenly other banks treat you like a leper. You get charged all these extra charges. Just to give you an idea in Feb 08 my bank charges for one business were R2900. A year later R 7000 (same account, same turnover).

Now you are forced to revert to beg extra terms with creditors, plead with debtors to pay quicker, curse at bargain purchases you cannot take advantage of, scrounge to free up money (like sell your own vehicle to yourself!), curse FNB, plead with FNB, become dizzy in this whole matter. Finally just when you are about to die they give you a pen and a poisoned sheet of paper. That is where I was today.

I am actively preaching your message and your name. I am a business warrior in training!

Best Regards

John P. (For obvious reasons I have changed his name.)
Email received 2009-04-02

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