The banks aren't happy with the govt strongarm tactics asking them to lend small businesses more money, as the banks are saying the reason they are refusing is simply down to risk.
So all the big banks have agreed to be audited to find out why small businesses are getting refused, to satisfy the govt that they are not being unfair.
"Mervyn King, Governor of the Bank of England, has talked about the "heartbreaking" sight of so many UK businesses going under because of lack of credit. Britain's Federation of Small Businesses says 300 to 400 of its members are collapsing every week.
But the banks have said that lending figures are down due to lack of demand and only risky companies are being turned away."
Banks' report aims to blunt lending row - Telegraph
It's an interesting point, does access to credit simply stay off the inevitable if a business is in trouble? Maybe there are better solutions if its cash flow, like factoring etc.
I can't see loans getting turned down for expansion and growth, if presented with a well written business plan, and the business has a good trading history or am I being naive?
I was recently put in a position to test this. I am a very very small company, ie 1 man band with wife helping out with accounts/admin when she can. We were having cash flow issues as we dont have access to overdrafts etc due to the 'hit the ground running' way we started. We dont even have a business plan as it was a case of 'earn money this month or dont pay the mortgage'. Following advice from business link we opened a bank account with barclays. (they didnt suggest barclays, just that i should open an account). I mentioned to bank about the buisness plan and 'my business manager' thought that i had passed the point of needing one! All going fine for 3 or 4 months. Lots of quick pay jobs and bills being met. Then we hit some jobs that took longer to pay, or someone was on holiday, or they were waiting to be paid themselves etc etc. We asked our bank if we could get a small overdraft to aid cashflow issues. (factoring is too expensive for us at the minute). She went off and came back with a refusal as there wasnt enough money going through the account.....  Hello.... thats the reason i need the overdraft. If i had money going through the account, i wouldnt need the overdraft fallback.... Nothing they could do as i was so new. So basically the FSB are right, My bank just basically shut the door behind me and left me to the dogs.
It is a tough one Andy, but to be fair the banks are businesses and one of the reasons they got themselves into trouble was taking too many risks. They cannot win. If they don't lend they are hurting businesses. If they lend and it goes wrong then they are hurting the overall economy. My own company is financed through my own cash. I won't borrow, I refused an overdraft when it was offered to me, purely out of spite as I don't like banks. I'd like to see the banks get back to sensible lending where they actually assess every customer on their own merits, to be fair I think some of them are trying to do this. Rather than employee account managers or advisers they would be better off getting in an experience commercial credit manager who has worked at a decent size corporate and get them to make the lending decisions when it comes to business banking. You will get a much better overall risk strategy and a little more risk taking but tempered with a sound no when it is the only correct decisions. Anyone from one of the banks reading this want to talk to me about it, you know where I am Credit-Manager.Net
“I'd like to see the banks get back to sensible lending where they actually assess every customer on their own merits, to be fair I think some of them are trying to do this. Rather than employee account managers or advisers they would be better off getting in an experience commercial credit manager who has worked at a decent size corporate and get them to make the lending decisions when it comes to business banking. You will get a much better overall risk strategy and a little more risk taking but tempered with a sound no when it is the only correct decisions. Anyone from one of the banks reading this want to talk to me about it, you know where I am ”I'm sure that for small businesses most credit assessments are made by a computer and not an account manager / adviser / person. The person will just tell you yes you can have overdraft/credit or no you can't dependant on what the computer states!  Though I'm willing to be corrected if times have changed since my banking days (a long time ago).... |
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