The £20 billion question!
The Managing Director of RBS is lamenting the fact that they cannot “force businesses to borrow” and suggest that they have some £20 billion which is available to small businesses.
On the other hand, we hear every week that businesses cannot borrow from the banks. So what is the truth? It is quite simple; by applying common sense one can analyse the situation carefully as follows.
Yes, RBS is right in saying that business finance is available and that they are prepared to lend. Equally, SMEs are right to say that banks are very difficult to deal with and throw up many hurdles. I’ve mentioned on previous occasions that obtaining a business loan is like entering a boxing match – you have to be prepared to go all the 15 rounds and you have to be prepared to roll with the punches. Nobody wants to go back to the lending mentality which banks displayed in 2007 (the days of 125% mortgages), so everybody agrees that there have to be a sensible lending criteria.
However, banks are now so selective when choosing the sectors they want to lend to that they continue to sit on £billions of unused funding which isn’t helped by additional hurdles like added valuations, added reports, more accounting information, bigger cash stakes and so on.
Similarly, if an application for a loan has been written down on the back of an envelope or if the business plan has not been thought through then the banks will continue to sit on billions of pounds because it would be unfair to expect the banks to lend on poor applications.
So as I mention above, applying common sense may help both parties to communicate better with and increase the amount of business lending.
Now it’s time for me to plug our services! We know the commercial lenders and have been successfully arranging business finance for over 40 years.
Business Finance is available, you just have to know where to look. Get in contact with your local director!