A Government Enquiry into Lending for Small Business

I picked up today that Dylan Jones Evans is chairing an enquiry for the Welsh Government into banks’ lending to small business. I’ll be interested to see how much they manage to unravel as Banks have collectively been in denial on the subject of small business lending. “It’s not our fault, it’s that no one is presenting bankable propositions” has been the defence for the last year or two.

Deep seated problems

I hope they will enquire not only into new applications for lending but in the behaviour of banks to their “mass market” small business customers as well. For example HSBC have been tackling any business with an overdraft and bullying them into accepting alternative lending – factoring or invoice discounting usually, often quite inappropriately. Other Banks have done the same in more limited cases. HSBC culled a swathe of business managers back in the Autumn just a few days after they strenuously denied doing so. Whether the Head office spokesman knew about the cull and was wondering how the heck the journalist I briefed found out about it or whether the Head Office Spokesman had not actually been briefed at that stage remains speculation. 

One of the scandals about the ill conceived Project Merlin last year was that Banks were counting lending figures in their Merlin stats to look good that were not new money lending at all but were simply rescheduling old lending.Not much was made of the sickly outcome of the project that was announced with vigour and enthusiasm by the government a year earlier. The idea had been to encourage Banks to lend to small business and it failed significantly to do so. 

Shocking behaviour of banks 

Regarding banking behaviour I have come across cases where the account has been sent to some kind of “recoveries” department in a cavalier fashion when a competent manager would have been able to help it steer through choppy waters with no damage to reputation or loss of capital value. 

Shocking behaviour generally,  with a bag full of contributory reasons for it all happening. There is a lot of depth to such an enquiry and i bhope they manage to get to the bottom of some of these points in the short period they have to report. 

Other articles by Bob Shepherd 

I have a number of articles on line that relate to these questions you might like to see, with links below.

finance-for-business

small-business-and-banks

banks-and-the-clipboard

bankers-not-getting-their-feet-muddy

things-aint-what

bank-lending-to-small-business-smes

sorry-bout-that

fixed-or-floating

Bob Shepherd Associates is for business finance and business building. We try to get the components in your business working together and in proportion. The small business owner has a lot of divisions to deal with and to expect to be good at them all is a tall order. Let us see what can be done to maximise the potential of your business. 

Bank Lending To Small Business SMEs

Business lending by the UK's largest banks fell during the last quarter (BoE  Q2 2011) despite what Barclays says about its own performance. Of course it did - any consultant working on a local scale will report similarly.

Until Banks get training for their local business managers and then trust them to exercise some discretion to liaise with the Credit/Lending department the position will remain. So too will the belief out there that Banks aren't lending to small business. Therefore the business economy will remain flat.

The first signs that someone is thinking they should do something about it that I have seen came at a local level with an invitation to talk by a Regional Business Manager for one of the big ones. His new on the block business manager had 4 years in the Bank and 3 weeks on 'the Business Side'. An awareness course and a clip board to follow, is all he had, plus a few ideas he picked up from the family shop. Oh dear. Who is going to talk to him with any expectation of understanding? 

As it is, a report has said that last year 55% of businesses didn't even bother to go to their Bank because the word is out that they will be turned down.