Dear Mr Bank Manager (aka the ballad of the self-employed)

On most days I love being self-employed.  I like the control I have over how my business operates.  Whilst we’re still only a ‘micro business’ (read: no other ‘team members’ but us), it could be classed by some as a job.  However, I get to set my own salary, my own hours, my own work location, what products & services I offer, how I market & advertise and which customers I will (or won’t) deal with.

Running your own business also gives you an invaluable set of skills that you just don’t get when you are an employee, and a whole new ’empathy’.  Share stories of having cashflow battles, nightmare customers or stellar employees with another business owner and you’ll get that look of “I understand, I’ve been through that too”.  It’s the best of times and the worst of times and you are only accountable to yourself.

But recently I had to deal with the wonderful world of banks and their mortgage approval process.  Credit to my mortgage broker who buffered as much of the stress and string-pulling as they could.  However, I have a banking background and know that the self-employed & lending approval is like water and oil.  For starters, if you go the ‘low doc’ option (where you sign a piece of paper that promises that your income is enough), you also have to provide a 20% deposit.  I know that the days of 110% mortgages are long gone with the global financial crisis, but finding a 20% chunk of cash in a hurry (e.g. when your renting circumstances change) is no easy feat for anyone, especially if it comes with strong caveats about proving a 6 month genuine savings history.

Self-employed people are seen as a much higher risk to lend to than a salaried employee.  As I turn on the TV each day to hear of consistently rising unemployment figures and job layoffs, I think it’s time to challenge that belief.

So, Dear Mr Bank Manager, here’s my case:

As a business owner, I understand risk.  I understand that there are good times and bad times, and just because I’ve had a stunning profit this month it doesn’t mean that next month will be the same – though I will do everything in my powers to try and achieve the same stunning result.  Because of this, I know that the ‘annual salary’ on my payslip is not a sure thing.  Fact is, it’s not a sure thing when you are an employee either, especially in the current economic climate.  Therefore, I understand that committing to borrowing money from you and being able to pay it back is a risky move.  And as that money relates to the roof over my head and indeed my family’s, I’m not about to put us in a riskier position than I am comfortable with.  Note: I’m not asking for enough funds to build a mansion.  I believe that many of the mortgagee sales that have contributed to the real estate crash in the USA are from genuine people in salaried employment, who have suddenly lost the security of their paycheck.  Why? Because the business owner terminated his employees to protect his business.

I own the business.  I know it intimately – in fact I wake up at night thinking about it.  I know on a daily basis whether things are going well or not and I’m able to adjust my actions accordingly.  I’m navigating and steering this ship, I’m not just along for the ride.  Ask a salaried employee how well the company is going and how confident they are of keeping their job and their pay check.  They’ll hope everything is fine.  Who do you think has a greater certainty about the stability and continuance of their income?  If things aren’t going well, I’ll be making adjustments immediately, to get the results I need.  As an employee, you’ll do what you can within your sphere of influence, but you aren’t able to make the kinds of decisions and actions that I can to change the outcome.

As the business owner, I have my own best interests at heart.  I know that sounds harsh, and I do truly lose sleep over how to keep my business performing to pay the salaries of my employees.  But in the cold, hard light of day, my primary responsibility is to my own family.  If things really aren’t going well, my second-to-last course of action will be to lay off my employees, in order to preserve my own income.  My last course of action will be to close up shop.  This means that my employees are at a greater risk of losing their jobs than I am.  And there’s little they can do about it (other than contribute as much as possible to ensuring that my business is profitable – but at the end of the day, I am the decision maker).  In all of the lay-off announcements, who has been losing their jobs?  The workers, not the business owners, not the CEOs or Company Presidents … unless the whole business has completely gone under, and I think that’s usually a result of management not acting soon enough.

And, heaven forbid, should my business wither away to an unprofitable, unviable mess, I think I have a greater chance of survival.  My business management skills and the lesson I have just learnt will make for a much stronger second attempt at running a business.  If I do decide to look for another job working for someone else, I think that my skills and experience would outshine that of another potential ’employee-only’ candidate.  Not to mention the fact that my business currently services over 100 happy customers, many of whom would employ me in a heartbeat.  That’s 100 potential enployment opportunities that an employee may not have.

OK, end of rant, I’ve now stated my case.  I doubt that this will change the thinking or lending criteria of the banking world, but it’s made me feel better justifying my little place in the world economy.

I’d love to hear your thoughts.


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