Bank – the enemy or friend to business

Probably no less than 95% of operating businesses in Georgia are funded by the bank loans. These might be a low budget, or multimillion loans, depending on the scale of business itself.

Naturally, various businesses receive loans on the basis of various conditions. Different are, in this case, interest rates, bank approaches, payment stages, providing measures and etc.

Business takes loan in two cases:

1) When it plans to run a new project, and doesn’t possess enough resources of its own;
2) Appears to be in crises, and tries to overcome it, receiving a new loan.

In any case, business owners try to assure bank holders in success of their projects, with the aim of being funded by them. Thus business owners, in the role of bank clients, do everything to receive the amount of money they need. As a result, we can often see business projects, containing incorrect data, which is aimed at receiving the bank loan in any case. This means that at this stage business owners turn a blind eye to everything, among them, to the loan conditions, interest rates, payment terms… with one desire only – acceptance of loan.

Unfortunately, quite frequent are cases when business owners can’t manage to repay the loan, facing various problems. Further development of business becomes more difficult, number of debtors increases, etc.

Looking at all this from the position of the bank, we depict an interesting picture: banks themselves are interested in giving as many loans as possible and have much more clients. Bank holders wish to have in their clients strong business companies that have loans in their banks. If we take a closer look, we discover that bank holders are even more interested in giving loans, than loan recipients in receiving them. This is true, no matter how strange it may seem.

And if that’s the case, than why do we have the reality, which we have? One of the worst problems in the country is the issue of bank loans, and their victims, being offended by banks, and etc.

In my opinion it happens so, because approximately 90% of running businesses in Georgia consider banks not as their business partners, having their own business interests in them, but as “unity of people having money”, from whom they need to receive loans, by all means, and after that, every time they repay money for the loan, they are accustomed to idea that they “help banks to grow even richer”.

Everyone, who has ever received a bank loan, and I think their number is quite great; will catch themselves on the fact that they can hardly remember the period “from giving to receiving” loans, as they are in such a hurry to get money. But we start thinking and more over scolding over the bank for the interest rate, amount of repayment, its term and currency exchange rate and many other things that disturb us in a month, when it is time to make the first repayment.

Here is where we should ask the most important question: Who is in fault with it -bank holders or loan recipients (business owners, in this particular case)?

Due to the fact, that banks as well as business owners, have their own business interests in giving loans; they work for profit, it becomes natural, that bank holders count down what their profit will be for each loan they give, and if a loan recipient is unable to repay the loan, it appears to become a big problem for the bank too. That is why I do not consider it to be right to blame only the banks in all this process.
Logical is the following question; business owners who have received bank loans, and faced arising problems, would they still take a loan, if they could predict all those problems beforehand? I don’t think they might have a wish to bring loss or damage to their business.

The fact is that in Georgian reality in business (and not only) we start analyzing mistakes we’ve made in the past after the crises arises. One of these mistakes is whether or not was the company ready, to receive a loan as an additional obligation.

Business owners, who consider banks as their business partners, analyzing their business interests, and providing it with correct information, will never be discontented with receiving a bank loan.

Banks, as institutes working on receiving profit, naturally wish to have financially stable and strong clients. Thus, they try to provide their business partner companies with additional resources (loans), for receiving more profit for themselves.

Accordingly, if business companies consider banks, as partners, being interested in receiving profit from their particular business projects, and implement the project itself with this logic, continuing relationship with the bank, like with the partner, even after receiving a loan, this will greatly benefit the both sides.

Geno Geladze

Lawyer, Ed.D.