Some food for thought before financing a project
Life, business, investments, aspirations – our Wealth Architects are here to connect the dots. Christian Schweda is a self-proclaimed handyman. This is rather fitting, as his hobby requires many of the same skills that he applies in his day job as a credit structurer.
The ‘projects’ Christian works on are usually very big. They are rarely run-of-the-mill, and often consist of no less than helping his clients achieve their dreams. Are you an entrepreneur who wishes to use your assets as collateral for a loan? A family that wants to buy their dream home or a young professional who has been offered a partnership at a firm but doesn’t have the resources to buy in? “Everything relating to credit that goes beyond the realm of the standard is brought to my table”, he says.
Hammer and hose support
Christian is an expert at putting together complex lending solutions. Due to the complexity of his work, he has a highly-specialised set of tools in his professional toolbox. These include conducting in-depth credit assessments and carefully analysing collateral in order to determine how to best structure a solution. A strong network and collaboration with other specialists, such as external lawyers and tax specialists across multiple jurisdictions, are some of the other important tools he uses.
Are you looking to secure credit by pledging a significant amount of concentrated collateral? If so, here are his top three do’s and don’ts for anyone considering this type of loan:
- Be well prepared. “In my experience you usually know exactly what you want to do with the loan you are seeking, but don’t always consider the big picture before coming to us. It’s important to sit down and look at your situation as a whole: where do you stand at present, what are your objectives, and how do you want to reach them? Of course you should also be prepared to explain how you plan to pay back the loan.”
- Be fully transparent. “This isn’t always easy, because it involves being candid not only about your wealth situation as a whole, but often also your personal situation. Our business is based on trust and partnership. You need to give us information that you wouldn’t necessarily share with other people. I can’t approve a loan if I don’t have the full picture. But the more I know about your situation, the more I can help you and the more comfortable I am with a higher level of risk.”
- Accept that the world has changed. “Lending has become much more complex since the financial crisis. A lot of regulatory changes have been introduced since then that have had far-reaching consequences in my line of business. We have an important compliance role. That means we have to make sure that the risk assumed by you, but also by us as a bank, is reasonable.”
- Overestimate your risk appetite. “Something I see relatively often is that people have a misconception about their readiness to assume risk. In other words, they might believe they have a high risk appetite when they first come to us, but if the risk does indeed materialise, they react differently than how they had initially imagined. I recommend being as honest as possible with yourself when considering how much risk you really want to assume.”
- Think only about the best-case outcome. “You not only need to be aware of your own risk appetite, but of risk in general, and that it has the potential to become a reality. In this type of lending, there is usually a lot at stake. It’s important that you consider both the possible best case, and worst-case outcome before diving in.”
- Leverage to the maximum. “One of my biggest pieces of advice is to make sure to have a healthy buffer. Because if something unexpected happens in the market, things can change very suddenly. I tell all my clients: “Always leave a bit of room for manoeuvre.”
This portrait is part of the 'Wealth Architects' series in which we introduce you to our employees. All of them have practical tips and tricks in their area of expertise for you.