Borrowing, lending, laughing all the way to the bank

How to get rich quickly in New Zealand. A primer, by Peter Lyons.

It has been very easy to make big money in New Zealand in recent years.

It's a bit harder now.

First you register a company. Make sure it has a "reputable" name. Something like Imperial Finance or Bismark Loan Corporation.

The cost of registering a company is about $150. This provides limited liability, meaning if the business fails, you stand to lose very little.

The next step is to place a large ad in a Sunday newspaper with a toll-free number and a high rate of interest on any funds deposited with your company.

It is important to get an elderly and financially ignorant "important person" to front your commercials.

When people start ringing about lending money to your company, send them a glossy prospectus.

Nowadays you need to be more open and honest than a few years ago. However, honest and open statements can be written in small print on page 203.

It may be that you intend lending to your brother in law to buy secret international high-yield inter-bank bonds.

Your best mate from school also needs money to build luxury apartments in Huntly or Milton.

As the money starts rolling in, you can lend to yourself, family, friends and other punters to pay for their various schemes.

They will usually be into property development and speculation. In the meantime, you can also draw a hefty salary as the CEO of this private bank.

Unfortunately, things can turn ugly.

A major international financial crisis can cause the property market to sour.

It's not your fault and it really hurts when depositors in your business start complaining and demanding their money back.

Your family and friends may be left with a lot of unfinished projects that seemed feasible during the good times but are actually duds.

The depositors are clamouring for their money back. Fortunately, their deposits are for fixed terms.

But new money dries up and it is increasingly difficult to pay people back as it falls due.

Some depositors who are entitled to their money can be fobbed off with excuses such as computer glitches or poor mail service.

Eventually it must be admitted that things are bad.

The depositors will be furious and baffled. Surely any business with a solid name that has the support of an "important person" must be sound. Particularly if it sponsors the weather bulletin.

The best approach is to stall for time.Make soothing noises, keep drawing your hefty salary and hope for the best.

The fortunate thing is that most of the depositors won't live in your leafy suburb or dine in the same exclusive restaurants; many are elderly and lack the energy to do anything really nasty to you or your family.

Such a major financial loss could even finish them off. They also won't realise how dodgy your lending has been.

Only you have this information. It may be possible to dangle a few carrots in front of them and slide out from underneath the mess.

The first thing is to propose a moratorium.

It buys time.

Freeze all repayments and interest then cross the fingers and hope things improve.

The depositors should vote for a moratorium rather than receivership because they don't realise how bad your lending was.

They still have some hope of getting all their money back. You can also keep your hefty salary. Hope springs eternal.

After a year or so of missed deadlines for repayments promised under the moratorium, the depositors will start to get agitated again.

They are getting older and want their money back.

It is important to continue to make soothing noises and develop a new plan.