Banks still not lending to business'

lemonjelly

http://www.bbc.co.uk/news/business-13489884

OK, so we've heard this line for over 2 years now. The banks are continually being labelled as non-lenders at the mo, & this is stifling the economy.

Are they being made scapegoats by the incumbents? My feeling is that they are. After all, if the government has spent 2 years telling banks to lend more & the banks hadn't, then surely now would be the time to act. Wouldn't it? After all, the government gave plenty of concessions with respect to their "bankers bonus tax" which was due to scare the bejaysus out of them.

So will the government act? (that is rhetorical btw;))

Orpheo

businesses

bendix

More Cable rabble-rousing and headline grabbing.

Banks will lend to companies that are well run and likely to repay them. That is their core business.

The problem they are currently facing is that companies that are well run and can repay them, don't need loans. What are they expected to do? Lend money to bad businesses?

You can't have it both ways

abaxas

What do you expect? All the money is being lent for non business activities.

Doozergirl

bendix wrote: »

More Cable rabble-rousing and headline grabbing.

Banks will lend to companies that are well run and likely to repay them. That is their core business.

The problem they are currently facing is that companies that are well run and can repay them, don't need loans. What are they expected to do? Lend money to bad businesses?

You can't have it both ways

Yup. "Open for business" they say, but business managers are told to phone all their credit score A customers and offer them money. Those being the customers with money in the bank. Open for business to people who don't want to borrow, or if they could be persuaded to, don't want to borrow expensive money.

Pennywise

bendix wrote: »

Banks will lend to companies that are well run and likely to repay them. That is their core business.

That's what they want you to believe but it's just not true.

I speak from personal experience of my clients as I often get involved in dealings with the banks on their behalf. The way the banks are treating small businesses is utterly unacceptable. The only way you'll get a loan is if you're putting up a similar amount of money yourself - and that's only the start - you then have to prove that you're business is strong enough to make repayments which is another battle because it's all based on projections etc. Having a good trading/banking history stands for nothing if you can't meet the loan pound for pound AND find a way of "proving" you can repay it, i.e. by signed purchase orders/contracts.

Just had a year long battle for an independent financial adviser client who wanted to buy-out another adviser. He had a 10 year history of profits every year, never once so much as a bounced cheque, never exceeded minimal overdraft facility, always repaid company credit card in full on time, previous small loans for office F&F was repaid on time, year on year increases in turnover and profit. What more could a bank want? He was buying a similar business, established trading history, full accounts history, again, turnover and profits increasing year on year, even used the same bank/branch, genuine reason for sale (retirement). Both businesses could easily be run via one office, so savings in overheads etc meaning that turnover of target business would go straight down as profit. Thought it would get rubber stamped by the bank. Instead he got stamped on. He got nothing but the runaround for months - constantly coming back to him for more information, promises made and broken. Eventually they only agreed to 60% of the purchase price, backed by the small firms guarantee scheme AND a second charge on his own home on all bank facilities - that's two lots of security, loads of up front arrangement fees, not to mention additional ongoing fees under the SFGS. If it takes that kind of hassle to get virtually risk free borrowing, then there's no hope at all for normal businesses where risks are higher.

Before that, we helped get finance together for a small food manufacturer - the bank manager was so clueless, he didn't even understand the difference between buying a business as opposed to buying the company running the business - he kept going on and on about the vendor limited company even though the buyer was only buying the business, not the company - he just couldn't get it into his think head that it wasn't the same thing! Luckily, I knew a manager at a different branch so we transferred the application to her and eventually (after months) it was approved. But again, it should have been an open & shut case due to the amount put in by the buyers and the trading history/projections, but it was still a real battle.

The banks are really damaging the UK economy because they're not lending anywhere near enough to oil the wheels of business. Two reasons being that they are now far too risk-averse so won't lend where there's even the remotest possibility of failure (ie virtually every business) made worse by the dumbing down of the so-called bank managers who are little more than salesmen and seem unable to do anything other than tick boxes and put numbers into boxes on screen.

So, no, banks aren't lending, even to properly run businesses with sound plans, unless the proprietors are putting in the bulk of the funds needed and there is virtually no risk of failure.

ChiefGrasscutter

bendix wrote: »

More Cable rabble-rousing and headline grabbing.

Banks will lend to companies that are well run and likely to repay them. That is their core business.

The problem they are currently facing is that companies that are well run and can repay them, don't need loans. What are they expected to do? Lend money to bad businesses?

You can't have it both ways

Perfectly put.
I've dealt with various small businesses and the overiding impression I've been left with is that they excel in making it difficult for me to spend my money. The list of disinterest is amazing.... it's phone calls not returned, email requests for quotations ignored, obvious mistakes queried and never corrected, complete mismatch between what they say they can do (advert/web etc) and what they can actually do...and the list goes on
Lend this lot some money...errr no thanks

doire_2

The government have probably run out of ideas. Now the blame game starts

Conrad

Pennywise wrote: »

So, no, banks aren't lending, even to properly run businesses with sound plans, unless the proprietors are putting in the bulk of the funds needed and there is virtually no risk of failure.

Tis true, but on the other hand the FSA calls for greater capital adequacy and people applaude the noise, so which is it to be, larger capital reserves (safer Banks) or more lending as we cant have it both ways, can we?

Thrugelmir

Pennywise wrote: »

Eventually they only agreed to 60% of the purchase price, backed by the small firms guarantee scheme AND a second charge on his own home on all bank facilities - that's two lots of security, loads of up front arrangement fees, not to mention additional ongoing fees under the SFGS. If it takes that kind of hassle to get virtually risk free borrowing, then there's no hope at all for normal businesses where risks are higher.

So what happened to the generated profits of the previous 10 years? Not so long ago businessess grew by reinvesting profit back into the business, i.e. organically.

Conrad

ChiefGrasscutter wrote: »

I've dealt with various small businesses and the overiding impression I've been left with is that they excel in making it difficult for me to spend my money. The list of disinterest is amazing.... it's phone calls not returned, email requests for quotations ignored, obvious mistakes queried and never corrected, complete mismatch between what they say they can do (advert/web etc) and what they can actually do...and the list goes on

I feel like a madman lately as I find most entreprises to be lacking. My wife says I ought to start a feedback consultancy - perhaps you'll join me?

From special Tesco's toasting bread that wont fit into ordinary toasters, Audi dashboard that can only be wiped with a special cloth (ordinary clothes snag on the surface and leave a mess), log cabins (Forest Holidays Ltd) that brag about the built in BBQ, yet have a site supermarket that does not sell meat, the list is endless and all down to sloppy thinking.