THE latest lending figures tell us little that most business owners didn’t already know, which is that lending to small businesses is in decline, whatever the banks may claim.
If you take the British Bankers Association’s latest figures at face value you could be forgiven for feeling slightly encouraged, given that they show new loans to small businesses grew by £75 million between May and June of this year. Add this to the BBA’s assertion that 80 per cent of loan applications are accepted and it appears that things really are improving.
Yet a look at the Bank of England’s latest figures shows that in fact net lending to firms was negative in ten months out of the last 12 months. Overall small businesses repaid £46 billion more to the banks than was lent out. The banks oft-used argument is that small business owners are repaying their debts at a greater rate than before (true), and that they are not coming forward to borrow (not so true). It also neatly skims over the increase in overdraft charges and arrangement fees levied by most of the banks over the past year especially.
On Monday the government published a green paper on lending, which included a range of proposals aimed at tackling the funding crisis for small firms. These included setting lending targets for all high street banks, rather than solely for part-taxpayer owned Royal Bank of Scotland and Lloyds TSB. Banks that fail to lend enough could be named and shamed and there are also plans to publish details of banks’ lending so their performance can be measured.
It’s a start. The only problem is that the start doesn’t look likely to happen for some time. These are only proposals, this is only a consultation paper and in the meantime thousands of good businesses are facing a fight for survival because they cannot get finance from their bank, despite in many cases having been a loyal customer for tens of years.
The banks should not be forced to prop up firms that have no chance of survival. They have to be able to make a good business decision as to where to invest and what businesses to fund. But having failed signficantly to carry out due diligence in the heady years of the good times, lending (some might say) without proper consideration, they now appear to have gone to the other extreme and are penalising good firms as a result.
With Lloyds, RBS, Barclays and HSBC all due to report their latest annual results next week, and with analysts widely predicting a return to heady profits, now is the time for the banks to stop avoiding the blame game and start lending to viable business. It is time for the banks to concentrate on re-establishing the proper bank manager to business customer relationships that were once so important to both banks and firms. It is time for the banks to look at cases individually, making a decision on the real merits of otherwise of individual firms instead of seemingly relying on the ‘Computer says no’ model.
The 4.7 million odd small businesses in the UK must be hoping that the government’s decision to focus the spotlight once again on the high street banks will now reap rewards. We will be watching and looking for clear evidence that banks are more willing to help small firms. I look forward to hearing your views. Are things improving, or is the situation still dire?
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