03 Jul Why I stopped providing residential finance?
As many of you already know our residential product was officially pulled at the start of the financial year.
There were various reasons for this, many of them business related. But the straw that broke the camel’s back was something entirely unrelated.
I’ve noticed that the type of client that finances a commercial purchase is mainly thinking about cash flow.
Makes sense for a business to make ANY cash flow positive investment, not just solar. This was the whole reason I jumped at financing these assets.
On the other hand, a residential client generally finances simply because they don’t have enough money.
This is worrying because the borrowing amounts are usually so low. Our average residential lend was about $5,000.
On the other hand, the average commercial lend is over $30,000. Which is a reasonable amount to need to borrow for.
Unnecessary lending was a major reason for the last financial crisis.
Regulation was put in place to stop this from happening again. Although some (interest free guys) have wiggled their way through it.
This puts us in the same position as last time. Credit been given to people who shouldn’t be borrowing.
Hell, you can borrow $500 to buy clothing online now!
If you don’t have $500 maybe the lack of an outfit for the weekend isn’t your biggest problem?
And that’s the flipside to the issue. There’s no accountability these days.
You get yourself into a hole and it’s not your fault, it’s the lenders for giving you the money.
So what amount do we drawn the line at? $5,000? $1,000? $500?
And who’s to blame? The financier? Or the borrower?
I don’t know the answers. I just know I don’t want to be a part of it…