Media Release

New Zealand Credit and Finance Institute

Sunday September 9th, 2007

Credit Perception Impacts on Lending Realities

A professional organisation representing 500 of the country’s credit managers is warning businesses to batten down the hatches following the recent spate of financial insolvencies

New Zealand Credit and Finance Institute (NZCFI) president David Young says the recent collapse of nine finance companies in five months will severely dent consumer confidence resulting in less funds available for lending and, longer repayment periods in some instances.

“Credit is based around a belief that money will be repaid. Once that faith has left the market, it’s difficult to rebuild confidence.”

Fundamentally, the economy was still in relatively good shape but perception had a huge impact on credit, he said.

“Rising fuel prices and mortgage interest rates mean many people have less disposable income. This factor combined with a tightening of funds available for consumer purchases means we can expect a slow down in consumer activity,” Mr Young said.

For trade creditors, the most likely result was longer repayment periods.

“The prudent thing for businesses is to ensure they have a well resourced credit department with professional staff who understand the current credit climate and can a maximum return for their employers.”

PricewaterhouseCoopers head of advisory partner John Waller is one of 14 industry experts scheduled to speak at the NZCFI’s annual conference in Wellington next month. Mr Waller’s presentation on finance company insolvencies will provide an insight into the reasons behind the current spate of insolvencies as well as explain the challenges facing finance companies.

The conference will be held in Wellington on October 25 and 26.

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