Banks still not lending to business'

ILW

Conrad wrote: »

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?

Have any of the bank bashers got an answer?

Conrad

ILW wrote: »

Have any of the bank bashers got an answer?

Of course not, they have narrow reality tunnels. Tis the same mindset that bashes fat cat city traders yet fawns over fat cat pop stars such as Sting, because, ermm, well Sting is sorta right-on and effical in'it

Thrugelmir

ILW wrote: »

Have any of the bank bashers got an answer?

People hate uncertainty. Particularly when its outside of their comfort zone. So many years without a recessionary period has left an entire generation ill equiped to face the challenges that lie ahead.

Pennywise

ILW wrote: »

Have any of the bank bashers got an answer?

Yes, get back to having traditional bank managers who have been in post long enough to understand business and build proper relationships with their business customers and give them some authority and discretion as to which businesses to lend to. Let's get back to sensible lending limits for branch managers. Let's get away from the modern curses of the tick-box mentality and the dumbing down approach where we're stuck with wet-behind-the-ears "managers" who aren't anything more than salesmen and won't be in the branch for more than a year or two before they move on. Business lending was fine for most until the last decade or so. Let's just roll back to when it last worked.

Before the "modernisation" of the banks, our local Nat West manager had been in position for a decade or more and really knew his business customers - he had authority for lending up to £250k without referral to regional HQ and basically used his experience & judgment - OK, some didn't get the loans they wanted and others who did went down but the vast majority worked out fine. In one case, the client needed more than £250k and the manager told them it would be too much hassle and time to apply for so much, so they scaled it back to £240k on the bank loan and applied for another loan with another bank for the difference (to finance a different asset) - it all worked out in the end - client grew his business, banks got their money bank plus fees & interest.

I know two of the older style bank managers give up in the last couple of years and they both cite the reason as being too much interference from above and too much pressure to be a salesman rather than a bank manager. Both from Barclays. That's another two decent managers they've lost.

ILW

Fair point, but would that system be likely to increase or decrease overall lending?

ninky_2

Conrad wrote: »

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.

not madness but an alternative affliction commonly known as becoming a grumpy old man.:D

ILW

ninky wrote: »

not madness but an alternative affliction commonly known as becoming a grumpy old man.:D

I am beginning to enjoy it lately.

gagahouse

Pennywise wrote: »

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.

This may help in partly explaining why you get given all sorts of excuses and delays.

M4 amount and lending growth rates

Pennywise

Thrugelmir wrote: »

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.

I don't really think that's ever really been the case. You'll never get enough money together to buy a factory, or to take-over another business, or for major plant etc.

OK for smaller scale things, like small pieces of equipment, vehicles, etc., but usually these are financed by leases or HP these days.

I think I know where you're coming from in that a lot of businesses these days seem to expect bank loans for working capital, i.e. stock, tax bills, etc., which you rightly say aren't really appropriate for bank loans and should have been saved for via trading profits.

Banks have always been there for the bigger things, but go back a few decades (or even a century or two), and you'd find that it was a lot more open and easy for businesses to secure equity investors by selling shares (and other securities) to the public. It was a lot easier and cheaper to make a public offering of shares even for relatively small firms wanting relatively small amounts of investment. These days, you have all the rules, regs, costs and hassle of the stock exchange which makes the whole process prohibitive for all but the largest firms. OK, we have the AIM market, but even there, you're looking at tens of thousands of pounds in fees/costs and realistically looking for investments of several hundred thousands, so again completely outside the scope of most businesses (as the vast majority are "small" and need far less money. So you have to look to angel investors which are few and far between and require shareholdings out of proportion due to perceived risk. There really isn't any "market" for normal Joe Public's to invest a few hundred/thousand in local small businesses. That's why small firms have no option but to go to the banks, which has been fine for the past few decades, but now that's dried up as well, so realistically, small firms have no avenues to obtain relatively small amounts of finance (i.e. the range £10k to £100,000 in particular). Go back a few decades and even local councils would invest in local companies using debentures which are in effect secured loans - don't see that these days do we?

The FSA/Stock Market/Bankers have a lot to answer for as they've effectively blocked small firms from accessing relatively small amounts of finance. If banks aren't going to start realistic lending to small firms again, then we need a "small stock market" with far less regulation and cost, where firms and small investors can buy/sell shares for smaller amounts of investment with far less cost and hassle.

ILW

I think the big question that nobody has an answer to is-

Do we want more lending from the banks to businesses which by definition means less stable banks?

From my experience, banks are currently more than happy to lend to virtually risk free businesses, but a lot of the demand is from the higher risk ventures.