Are the banks backing small business or not?
Figures have revealed that in the last year of the 827,000 applications from SMEs to banks for credit (e.g. loans, overdrafts and credit cards) were 86% approved. In these ongoing times of a depressed economy and possible collapse of the Euro zone surely this is good news, isn’t it? It is a demonstration that the banks are indeed backing small businesses in precisely the way that politicians, business people, the public and bankers have all said is necessary if our economy is to bounce out of these difficult trading conditions, surely?
Some would say that the banks are still not helping enough. The same report confirms that independent figures show 40% of SMEs successfully appealed the initial decline decision on their lending application to the bank and were ultimately granted an alternative lending agreement. The bank changed their mind in 40% of those cases. Such a decision overturn rate is far too high. By admitting that they made the wrong decision in 40% of the initially declined credit applications when they were appealed confirms that the banks do not wish to lend to SMEs, doesn’t it?
There does seem to be an all encompassing feeling that this is a bad time to start a new business and surely the wrong time to expand an existing one. There remains a lingering doubt that if as an SME owner you apply to your bank for credit that the answer will simply be “Computer says no”.
Many business people continue not to apply for credit for that reason but would you start a new business at this time? Would you risk everything by mis-timing a business expansion? Will you get the finance you need any how? The statistics suggest you will get the necessary funds.
How many business theorists tell us that the right time to enter a market is just after it has reached the bottom? This gives the best potential for growth. So why aren’t we all doing that? Is it because we can’t get finance for the project? The statistics suggest we can. Or is it that we don’t have the attitude to risk in our business lives that we suggest the banks should have in their lending decisions to SMEs?
Is the BBA giving us good news or bad news? Is this all just lies, lies, statistics? Do business people have the appetite for risk that the banks do not, or is it vice versa? Time will tell…
Peter Wood, Business Loans Manager, Essex