World Business and Economic Analysis
World Business and Economic Analysis
The head of the Association of Private Banks and Credit Institutions, Kourosh Parvizian, has sent a letter to Central Bank of Iran governor, Valiollah Seif, informing him about private lenders’ decision to lower their one-year deposit rates from 18% to 15%.
The letter, published by Tasnim News Agency on Saturday, notifies Seif that the banks will implement the rate cuts from June 21. The move comes after the Money and Credit Council– the top monetary decision-making body – failed to discuss the issue of interest rates at its last meeting on Tuesday, giving banks space to set rates as they see fit.
“CEOs of private banks and credit institutions, in a meeting on June 12, agreed to offer a maximum 15% interest on one-year deposits which will provide the basis for also setting rates on short-term deposits,” Parvizian said.
The letter, however, does not mention any plans for lowering the lending rates which have hovered around 20%, raising concerns that the gap would hurt the business landscape and small investors.
Earlier this week Bank Pasargad Iran became the first lender to announce that it has lowered its one-year deposit rates to 16%. Hossein Motamedi, ENbank’s CEO, also announced that his bank will offer lower deposit rates and several other banks said they would follow suit.
Businesses Concerned
Failure to address lending rates has raised concern among businesses. Cheap loans seem to be vital for boosting production and trade in the country. Currently, bank Loans hover between 20-22%.
Economy Minister Ali Tayyebnia has stressed that there needs to be a logical 2-3% or a maximum of 3-4% margin between deposit rates and lending rates.
Meanwhile, the CBI said on Friday that the Money and Credit Council will have to review the ‘economic trends’ report before making the final decision about lowering deposit and lending rates. The report is set to be handed to the council in a month, according to CBI vice-governor, Akbar Komeijani.
Addressing banks’ plan for lowering deposit rates from next week he said, “Banks can make their own decisions. [But] I hope they will also make the final decision to cut lending rates as well before the MMC intervenes,” Fars News Agency quoted him as saying.
“Interest rates are a key issue for the CBI and it has always been monitoring it,” the senior banker added.
Whether you're starting a business or already have an established company, there's a good chance that at some point you will be looking for money, either debt or equity, or combination of both. This article should help to properly prepare the materials presented to investors, thus increasing chances of successful funding.
Investors have money, but they don't have much time to sit and read through 27-pages business plan. If your initial presentation is more than 2-3 pages long, most likely it will end up in a waste basket. Under best circumstances you will receive a call from investor asking to briefly explain what do you actually want. Therefore, lengthy business plan is just as effective as a business card with contact information. It doesn't mean that eventually you won't need a comprehensive document, but not for the initial introduction.
Do not overburden the document with technical details because majority of investors simply don't care how raw material A transforms to end product B. Majority of investors speak financial language and the executive summary should be written in a language that they understand. Depending on type of financing you're looking for, include only relevant information. For example, if you are going after assets-based loan, include total value of assets, preferably both estimated orderly liquidation value (OLV) and forced liquidation value (FLV), and skip on principals' bios, because they are not relevant for this type of loan. It is also good to know that you can expect somewhere between 60% and 8% loan-to-value (LTV) depending on type of collateral.
Lets start with 1-5 paragraphs about your project, when it was started and how you've got to this point. Be precise, clear and concise.
Next, tell investors what you're looking for. What is the total amount? Should it be debt or equity, or both? What are the expected terms? Do you need a lump sum, or can receive money in tranches?
Now, lets put on investor's shoes. What savvy investors are looking for... what is the common denominator? Simply put, investors are looking for high return on investment (ROI) and low risk. Every project that investor evaluates should pass ROI-Risk test. Therefore, the presentation materials should contain information addressing these two subjects. Principals are usually pretty understanding to ROI requirements and reflect it in the documentation, however risk assessment is often overlooked. Needless to say that very often risk is the decisive factor.
It is critical for a principal to understand that 100% financing is very, very rare. It comes with hefty price tag and substantial collateral requirement. Usually investors want to see principal having some "skin in the game" to mitigate the risk. It's much less likely for a principals to fail if their own money are involved. Save yourself a lot of time by realistically evaluating the investment opportunity.
Regarding due diligence fee - be prepared to pay for direct expenses, like travel, food and lodging, hiring local counsel or documentation processing service, etc. Just make sure that such expenses are not padded a lot; ask for due diligence fee breakdown.
Deputy Commercial Manager of SAIPA auto making group Hassan Baghaei said on Saturday that the group has inked a one-billion-dollar finance deal with South Korean company SK networks.
Baghaei said following preliminary talks between the two sides, the deal was inked on Friday.
The South Korean company is to finance SAIPA's purchase of dlrs one billion worth of spare parts in complete knock-down (CKD), he said.
Talks between the two companies on joint venture investment is now underway, he said.
SAIPA has recently placed a dlrs. 250,000 order for purchase of auto-parts from South Korean company, he said.
During the recent visit of the South Korean president to Iran, 19 memoranda of understanding (MoUs) on broadening of mutual economic cooperation were inked between the two countries.
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