Some say they are…a lot say they aren’t…. the debate rumbles on as to whether our high street banks are making it any easier for smaller firms to borrow money now that UK GDP is growing again.
Vince Cable and his BIS team may be right in thinking more pressure is needed to boost lending by banks. Firstly though, it might be wise to understand why some small businesses succeed in persuading their banks they are worth the punt, while many others get their applications flatly turned down- often without a decent explanation!
I was down in Westminster a few weeks ago talking to a trade credit insider at BIS to learn of one big reason why banks are reluctant to lend money to business clients. Apparently, from evidence the banks have shown to government officials, its clear that many applications from small businesses are woefully inadequate. Some business folk may still be hanging on to the mindset that was evident in the years leading up to the credit crisis, when all you had to do was ask and you’d get your loan approved. Which raises a big question in my mind – are firms trying to obtain advice from professional advisers like their accountants on how to pitch for a business loan in this new age of bank tightfistedness? And what should a loan application be supported with (management accounts, a cash flow forecast, breakeven analysis, a yearly business plan) to ensure a greater degree of success?
If small businesses aren’t seeking this advice from their financial advisers, they should be. Many business owners are good at what they do on a day to day basis when running their businesses. However, pitching to a reticent bank for a loan in this economic climate calls for a degree of expertise I would guess sits outside the average small business owner’s comfort zone. Perhaps accountants should come forward a bit more to proactively promote this type of service, as clearly, there is a gap in the market that needs filling urgently.
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