Lending to small and medium businesses

macaque_2

If banks are not lending to small businesses, what contribution are they making to the economy?



http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9220821/Bank-of-England-data-show-slump-in-small-business-loans-continues.html

CLAPTON

maybe george should make that 'just less than 10 billion' available to small businesses rather than the IMF/Eurozone

pqrdef

My impression is that most small businesses are undercapitalised and are looking for venture capital disguised as loans. I don't really think that should be the banks' job, even if they've done it before.

Do the borrowers play fair? Have they put the house in the wife's name? Will they take as much as possible out of the business before they go bankrupt? Would you lend to them?

macaque_2

pqrdef wrote: »

My impression is that most small businesses are undercapitalised and are looking for venture capital disguised as loans. I don't really think that should be the banks' job, even if they've done it before.

Do the borrowers play fair? Have they put the house in the wife's name? Will they take as much as possible out of the business before they go bankrupt? Would you lend to them?

There are always bad eggs but, as much as anything, small companies are refusing to take loans because the banks' lending terms are so unreasonable (and this is not a new phenomenum).

CLAPTON

macaque wrote: »

There are always bad eggs but, as much as anything, small companies are refusing to take loans because the banks' lending terms are so unreasonable (and this is not a new phenomenum).

you mean, like the banks want to be paid back in due course?

macaque_2

CLAPTON wrote: »

you mean, like the banks want to be paid back in due course?

I think you have missed the point. The comment referred to banks levying unrealistic charges, often to small businesses who are trading profitably but have to manage cash flow. It was not about the banks refusing to lend (which would be a different matter).

This brings me back to the original question. What contribution are the banks making to the economy? They are not serving the interests of SME's, their shareholders or the public. As for the tax payer, the banks know where to go with their begging bowls.

Thrugelmir

macaque wrote: »

small companies are refusing to take loans because the banks' lending terms are so unreasonable

In what way?

Small company lending is high risk.

ILW

There has been a bit of an attitude from "entrepreneurs" over the last decade or so where they do not believe they should put any of their own capital (such as a house) at risk and expect the bank to take all the risk.

HAMISH_MCTAVISH

ILW wrote: »

There has been a bit of an attitude from "entrepreneurs" over the last decade or so where they do not believe they should put any of their own capital (such as a house) at risk and expect the bank to take all the risk.

Funnily enough, home equity withdrawal has always been one of the most common ways to fund a business start up.

Of course, falling house prices and the banks LTV apartheid for remortgaging mean that route is no longer viable for a few million people.

HAMISH_MCTAVISH

Thrugelmir wrote: »

In what way?

Small company lending is high risk.

Not if it's done right.

With local decisions, made by highly experienced local business managers that know the local market, have a background in the private sector and understand businesses.

Of course banks don't have those anymore because a "computer says no" approach is cheaper.

As I've said elsewhere, our angel group funds small businesses that banks won't touch. And 2 years in our default rate is precisely zero.

Not that I'd expect bankers these days to be as competent at risk analysis as a small group of local businessmen.

That would clearly be expecting far too much...

CLAPTON

macaque wrote: »

I think you have missed the point. The comment referred to banks levying unrealistic charges, often to small businesses who are trading profitably but have to manage cash flow. It was not about the banks refusing to lend (which would be a different matter).

This brings me back to the original question. What contribution are the banks making to the economy? They are not serving the interests of SME's, their shareholders or the public. As for the tax payer, the banks know where to go with their begging bowls.

well the article didn't actually say that.

non-public banks aren't supported by we, the tax payers and so make their best commercial judgement even if it is different to yours.

public banks.. I'm happy they don't lend to businesses that are unlikely to repay us