Filed under: Small Business News — Alan @ 8:38 am
The economy is in a bad state and unemployment is rising, and small businesses are also suffering as banks are refusing to lend to many potential customers. There are no legal obligations for banks to lend to people so they are only motivated by their desire to see borrowing increase and apparently this desire is not very strong.
Banks have said that the demand for loans is low and that is why they are having to refuse loans to some of the people who come to them. The Small Business Federation disagrees with this statement however and says the banks are receiving many applications for loans. Small businesses often need an injection of capital from a bank loan to allow them to expand.
Critics have said that banks are capable of making the number of refusals look less than they actually are by only noting those refusals of formal applications, despite many people being refused after a casual enquiry. Business owners also fear that the requesting of a loan may make their overdraft more expensive.
The fact that the economy is doing badly can be a good opportunity for those businesses which are strong enough to weather the bad times. They are seeing their competition going out of business and this means there is a good opportunity to expand. The problem is they need capital to do this and they banks are refusing to provide it.
Osbourne’s promise of a country that will encourage business now seem hollow to many of those wanting to borrow. It also seems the government is doing little to encourage more manufacturing in Britain, something that many people want. This rebalancing of the economy will be a very difficult task as the growth figures in manufacturing need to be very high, recent figures suggest that manufacturing is still declining.
Filed under: Small Business News — Alan @ 10:41 am
The latest nationwide survey by the Federation of Small Businesses has established that in the past year banks are still not lending to those businesses that need to expand and grow. Companies are missing out on opportunities to progress.
Judi Brazkiewicz, Chairman for FSB Worcestershire, said if the Government required the private sector to pick up the slack created by cutbacks to the public sector, the banks have to begin lending once more.
The survey has found that 20% of members that have made contact with the banks and asked for credit, 33% of those were turned down and this is comparable to over 300,000 businesses not receiving the credit they need. 16% of the 33% turned down were given no explanation while just over 25% were refused because of inadequate security.
Others determined the bank terms were too severe and decided to use their own cash as an alternative. Being refused has led to small firms experiencing ongoing financial concerns and one in five has postponed investment plans. Businesses request loans for a variety of reasons. There is a need to purchase more equipment and machinery, additional finance to cover cash flow and to expand their company.
The Bank Managers are no longer acquainted with their customers and decisions are made centrally in accordance with predetermined criteria’s. After meeting with bank officials who declare they are very much open for business, the FSB say after referring business owners to the bank, they are turned down.
Filed under: Small business — Alan @ 6:11 am
The biggest banks in the country will be lending less than expected to small and medium-sized enterprises this year, at the same time as former bosses of Barclays, HSBC and Lloyds could be earning more than £3million in pay and benefits, the Sunday Times reports.
The widely-reported lack of bank lending, prompting fears of a ‘double-dip’ recession, led to “Project Merlin”, involving discussions between the Government and the ‘big five’ banks in Britain – Barclays, HSBC, Lloyds, Santander and RBS. According to the Bank of England, these five, plus Nationwide, account for around 65% of lending to business.
Discussions are nearing a close and agreement, according to Treasury Minister Danny Alexander on Sunday. Alexander, speaking to the BBC, said, “We are trying to have a settlement with the banks that enables the economy to move forward. The most important things are to secure additional lending for the economy, particularly for small business, and for the banks to show some responsibility about pay and remuneration to reflect the justifiable public anger.”
The likely agreed lending figure will be somewhere between £160-180million, compared to the £200million envisaged by the Government. A pay deal has not yet been agreed for current employees, by contrast to their former managers.
It remains to be seen whether Project Merlin will be able to pull a rabbit out of the hat and spark a strong economic recovery.
The economy is in a bad state and unemployment is rising, and small businesses are also suffering as banks are refusing to lend to many potential customers. There are no legal obligations for banks to lend to people so they are only motivated by their desire to see borrowing increase and apparently this desire is not very strong.
