August 26, 2011
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.
July 31, 2010
Filed under: Business Finance — Alan @ 9:07 pm
Banks may face a new tax on any profits if they do not start to lend more to SMEs and other companies in need of credit as well as start limiting their bonuses according to the Business Secretary.
Vince Cable stated that if back payouts to shareholders and staff were trimmed then approximately £50bn could be generated towards new business lending.
At a news conference he stated that dividend payments are too large along with bonuses and the Government needs to look into placing a tax on profits in order to properly choose a way to re-invest into businesses. He also said that they hope the Government will not have to use sanctions to force lending, but it will remain an option.
Cable’s warning complimented the publishing of a new consultation paper from the Business Department and Treasury that looked at ways to increase business’ access to cash flow.
More government loan guarantees, stock exchanges on a regional level, and other methods to boost liquidity in the banking system were also suggested as a way to promote more financing among banks.
The Business Secretary stated that at the moment complaints from businesses that they cannot get proper access to finance is simply falling on deaf ears as banks continue to maintain that they are lending at an 80% level.
He added that the problem is especially large for SMEs that cannot find the proper finance impairing their ability to create jobs.
July 11, 2010
Filed under: Small business — Alan @ 4:50 am
Britain’s banks lent out a relatively small £900 to small businesses over the last year according to industry official statistics, which is less than the annual rate average of the last five years.
Politicians and small businesses have criticized banks for not supporting the grass roots industry and lobby groups are taking hold of the statistics from the BBA (British Bankers’ Association) as proof that there is more to be done.
A spokesman for the FSB (Federation of Small Businesses) stated that the credit demand is just as strong as in previous years, but small business is starting to lose faith in lending from banks because of the rising cost of finance.
The BBA statistics show that lending to SMEs increased from £54.4 billion in 2010 from £55.3 in 2009. Over the prior five years lending grew on average by about £4 billion. Director for the BBA, David Dooks, stated that the numbers show a reduction in the credit demand.
The BBA also added within the report that it recognizes trends in customers that are willing to pay off their loans and instead increase their savings.
Last year the report showed that customers paid off £11.6 billion of non-mortgage debt and credit card debt over 2010. Net mortgage lending was only £7.8 billion which is less than a tenth of its increase in 2006 when it reached £110 billion.
The banking industry paid a total of £12 billion in corporation tax throughout 2008 and currently employs 420,000 staff.
June 25, 2010
Filed under: Small business — Alan @ 5:55 pm
Many SMEs are worried that SME lending will be hurt by the new banking levy due to the fact it was not carefully constructed. George Osborne announced at this week’s Emergency Budget that banks in the UK will be forced to pay out over £2b as part of a new annual bank levy.
The balance sheet will be paid starting next January by all UK banks, UK building societies, and the UK operations of foreign banks. As such, it will likely be the first levy that will be implemented on a global basis.
CEO of the UK bank Aldermore, Philip Monks, stated that it is not enough to exclude newer banks from the levy because all SME lending should be excluded.
Monks continued to explain that SME lending is a vital component of economic recovery so it is counterproductive to consider taxing any of this funding. Instead, Monks stated that the levy should be placed on banking areas such as casino use that do not benefit the economy.
Aldermore also stated that although SMEs likely will agree with many of the Budget announcements, they will be angered to hear that both the VAT and CGT will increase while capital allowances are going to be reduced.
Monks added that the GCT rise will cause fewer entrepreneurs to consider self-employment as a viable option.
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.