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Five Greatest Ideas for Managing Your Bank • 97

realise that that is a bad deal. Suppose, however, that you are completely broke and
know that you will have £71 in cash by the day at which you have to make the
capital and 100% interest repayment - still not interested? Ah, I forget to mention
that your two children have not eaten for 36 hours and that they are wailing for
food. In such circumstances the loan sharks of the inner-city sink estates make such
loans and prosper. This is a suitable and accurate starting point for thinking about
the purveyors of loan capital.

Their view is that they tailor their interest charges to protect themselves against
the risk of default. The more difficult the situation the borrower is in, the higher the
risk and therefore the higher the price of help.

If you are running a huge conglomerate and wish to borrow $250 million to buy
up a subsidiary in another country, you will be wined and dined by various money-
lenders eager to get your business at less than 1 % above the rate at which the banks
themselves borrow money. If you need £20,000 to tide your corner shop over a
refurbishment, you will probably have to trawl the High Street to find a lender
willing to lend you the money at 5 or 6% above bank rate. And they will probably
want you to back the security of the loan by re-mortgaging your house. Banks are
indeed the people who lend umbrellas to small businesses only when it is not raining.

So don't give them any surprises by the consistent use of KISS and TICK.

Idea 56 - Keep your cashflow document up to date

Producing a good cashflow statement depends on four things, one of which should
be easy, the second gets easier with time, the third takes up much more time than
you could possibly imagine and the fourth is a bastard. They are:

1. An accurate estimate of your fixed costs: when you did your documentation for
the bank, you will have filled out the expenses and wages sheet that identifies
your fixed costs. As you add to them, keep this number up to date. Remember