Tips for Lending Money

I delivered more than 20 speeches in Turkey and abroad in March since non-governmental organizations wanted to finalise all their meetings before Ramadan. But I must say that I have always seen worried faces at these meetings I attended as the representative of Istanbul Topkapı University.

In only one meeting, someone asked me, “Professor, will USD/TRY exchange rate drop to 11.00?” while 99% wanted to hear my opinions about whether things in Turkey will get any worse. A political analyst said, “Get ready, Russian money will flow in Turkey,” but another expert at the same meeting replied, “If this would be true come, it would have come by now.” According to most experts, Turkish economy will face low growth and high inflation.

Surely, neither bankers nor financiers will be happy about low growth and high inflation. Because low growth means low profits and it’s hard to pay off your debts if you make insufficient money. High inflation, on the other hand, will lead to restructuring of old debts with higher interest rates. It is quite normal that businesses trying to manage huge profits with small capitals constantly need working capital at all times. Businesses will need more money as costs are constantly rising and unfortunately the cost of this money will grow with each loan application. Also, the fact that businesses become riskier will naturally result in higher interest rates. I think that the new and higher corporate tax imposed on financial sector will make things even worse.

Financial Sector Should Prioritise Ethical Behaviour

First thing to do is to urgently update the priority list of expenditures in real sector. At the same time, bankers should analyse the typical behaviour of real sector companies to reveal how much of the expenditures are actually related to the business. Experienced bankers should be cautious about bosses who run their personal expenses through their business but who are stingy about wages.

Additionally, we need to solve the problem of not using the funds properly, which was experienced in the previous CGF process. I think that it is a moral responsibility rather than rationality to give loan priority to companies that use the funds they generate for business purposes only. Accordingly, bankers should consult with certified public accountants when running an evaluation of credit risk assessment for loans. Details such as the number of staff, the number of company vehicles, fuel costs, travel expenses, gifts, representation and entertainment expenses, decoration, invoicing between sister companies, etc. will give sufficient insight about the uses of funds in a company.

So, when applying for a loan or a credit line, it is quite important to ensure that the documents requested from the company are as detailed as possible and in line with all legal standards and requirements.