Foreign Perspectives

Archive for the ‘Business’ Category

By far the most popular post on our Whole Earth Guide is the one detailing how to go about opening a bank account in America.

The reason is simple really: if you run an online business then sooner or later you generally find yourself in need of an American bank account. Unfortunately, the increased security measures in place post 9/11 mean that it’s not quite so easy to open one these days unless, of course, you’re living in America and therefore a considerable number of websites have grown up with the specific aim of selling you the required information.

Our site doesn’t charge for that information and therefore is increasingly popular as it provides exactly the same information that other sites charge anything from $5 to $250 to provide.

However, we’re sorely tempted to start charging for it too given some of the emails we’ve received demanding additional information and wanting to know why it isn’t on the site yet. What we’ll likely do is to charge for the hand-holding level of information or at least offer it for sale as the information on the above page is quite sufficient to allow anyone to open an account in America.

The events surrounding the slow death of the Northern Rock mortgage bank get more and more surrealistic by the day.

Back in July last year it was actually the leading mortgage lender in the UK with 19% of the entire market for new mortgages sold in the first half of the year. Bearing in mind that it’s basically a fairly small building society this should have been the first sign that trouble was ahead as it meant that to source the funds for those mortgages it had to move well outside it’s traditional deposit base and borrow on world markets to find the money.

Just two months after announcing these fantastic results we find that the bank needed to go to the Bank of England for emergency support which, of course, it was granted. The next day the troubles began in earnest for the bank as everyone tried to reassure the customers that everything was fine. Of course, it was far from being fine as the large queues of depositors asking for their money bank well knew on hearing this announcement. On September 17th, just three days later the government moved in to guarantee the deposits held by the bank, subsequently extended on October 9th to include all deposits made regardless of the date.

Moving on to today we find that the government has provided some �25 billion (around �1000 from every family in the country) to support the bank and here’s where the magical world of finance really kicks in.

Although the bank seems to have enough security to repay all of it’s debts, to repay everyone would entail calling in the mortgages on an awful lot of people which obviously wouldn’t go down too well and might not even be possible legally for those that have been keeping up their repayments. Of course this is the same situation for all banks: if everyone wanted their money back at the same time there just wouldn’t be enough on hand. Therefore, in a sense, it makes sense for the government to provide backing to avoid repossessions on a wide scale and to provide confidence in the banking system in general.

However, the government clearly need the money back at some point unless they want to nationalise the bank.

The snag is that there is really no way for them to actually get the money back. So, what they’re doing instead is proposing�selling bonds to the value of that £25 billion. The problem with that is that nobody wants to buy bonds from a bankrupt bank and therefore the government will have to provide the security for the bonds too which means that they won’t be clear of that £25 billion for some years, if ever (some similar bonds issued for the first world war still haven’t been repaid!).

And, of course, this is just one bank. Granted, a bank that over-extended itself but who’s to say that there aren’t a few other banks around in a similar situation or who could find themselves in such a situation if the current squeeze on credit worldwide continues?

You’d think that that these days banking practices around Europe would be fairly standard. After all, the banks handle international business every day so they’re in constant contact with their counterparts in other countries.

Of course, it’s one of many areas where European business practices are far from standard.

Take the UK and France for example. Two countries with a very long history of interaction so you’d think that many things would be similar except that they aren’t.

In the UK, credit cards are commonplace and it’s normal, expected even, for people to have several of them. In France, credit cards are a relatively new phenonmen and remain very rare.

In the UK, almost everyone has an overdraft and the banks prefer you to be permanently overdrawn as they collect more fees that way. In France, they’ll close your account if you’re overdrawn more than a couple of months.

In the UK, debit cards don’t have any purchase limit on them. In France, you can’t buy more than 3000�� a month usually, which is why you often see people resorting to cheques towards the end of the month.

In the UK, nobody will accept a cheque without a cheque card (a card issued by their bank and guaranteeing the cheque will be paid). In France, almost everyone until recently accepted cheques because if you bounced a cheque you could be banned from having a cheque account at all. That actually worked well until very recently when the economic situation seems to have caused something of a run on dud cheques so the effect is that more and more businesses don’t accept cheques which is sure to cause trouble soon so long as that debit card spending limit remains.

Any one of those differences can easily fell you if you don’t know about it in advance.

Amazingly many B&Bs still don’t accept credit cards and thereby end up losing business as many people prefer to pay directly with a card than to have to pay extra charges to lift cash abroad.

But, how do you do it?

Well, there are basically two ways that a B&B or self-catering complex can operate with a credit card.

1. Accept cards solely for deposits; and
2. Accept cards for all payments.

Naturally, it’s possible to start off just taking card payments for deposits and move onto accepting them for all payments. In fact, it’s useful to do exactly this to try out card payments for your business.

If you’re only taking card payments for deposits then you don’t need to sign up with a bank. The simplest way is to sign up with paypal for a business account. Payments received will cost you 3.4% plus 20p so if you take £10 will cost you about 54p (5.4%), £100 will cost £3.60 (3.6%) and £1000 will cost £34.20 (3.42%). These charges are similar to those that a small business would pay were they to do credit card processing via their bank in the UK but somewhat higher than the typical 0.75% for banks in France.

From these figures you’ll see that it’s best to use paypal for deposits. That way a typical 25% deposit will effectively cost you under 1% of the total bill for paypal processing.

You could use paypal to accept all payments this way but you would need your bookings to be paid 100% in advance to do that as you can’t easily use the paypal system to make on the spot payments (if you really have to you can do it by having the guest logging in using your Internet access and making the payment). So, if you want to accept all payments by card, then you need to get the little credit card machine although, in principle, you can run with PayPals virtual terminal option (£20/month) which gives you the equivalent of the little machine but using your computer to process the cards.

To get a credit card machine setup you need to have a business bank account and, in most cases, have had it for six months although for B&B and self-catering properties the bank will normally waive the six months requirement. In France, you’ll need to be registered and provide your KBIS.

Costs for this vary a lot. You can buy your own machine but they’re rather expensive (typically £300/£500) and therefore most people rent them from the bank (around £20/£30 per month). In most cases you’re better to opt for a fixed installation as the portable terminals can cost 50% more. Other things to consider are which cards you’ll accept. Normally Visa/Mastercard are sufficient (and will include Visa Electron and Maestro). American Express is becoming more popular but is usually more expensive than other cards. If you get a lot of Japanese then it’s probably worthwhile taking JCB. You can even accept various storecards but unless you’re in a shopping centre it’s probably not going to be worth the extra expense.

How do you do it? Open a business bank account then apply for the credit card facility at your bank.

One thing to watch is that you will need Customer Not Present enabled. This lets you charge cards without having the credit card in your hand. You’ll need this to take deposits.

Is it worthwhile doing though? Yes, it is. Sure it will cost you more but you can take that into account in your pricing. If you assume that a credit card payment will cost you 4% then adding as little as 2% to your prices will pay for it all in that not everyone will pay by card and many of those that do will use a debit card which’ll cost you less. So, if you’re charging £50/night that equates to adding £1 to your charges. Incidently, don’t try adding that £1 only to credit card customers as you’ll just end up driving them away.

We’ve been looking around the prices of places locally and there’s quite a divergence between what some places are actually worth and what they might sell for at the moment.

For example, there’s a major hotel/restaurant complex near us that’s listed for almost EUR 2.5 million. It’s easily worth that as it’s a recently modernised building with over 30 rooms, large swimming pool, gardens, sports facilities, has a second building under construction to add another 30 rooms and planning permission for a third building for the complex plus extensive grounds.

Unfortunately, that complex is totally out of character with the region. There’s nothing comparable to it locally and for good reason: there just isn’t the market for it here.

So, whilst it might well be worth 2.5 million (and probably more), chances are that it’ll sell for around 1.5 million or so. That’s if it sells at all, of course, as it’s nothing like what people would expect in this area which means that nobody is looking to buy such a facility here.