Guest blog from Howard Graham, CEO and Founder of The Made Simple Group and member of the BBC’s Small Business Panel of Experts. All opinions stated are the author’s own.
A headline article in the Daily Mail, dated 16 February, headed “Small firms left to starve” suggests that 60% of businesses are still being denied loans.
The article, based on research carried out by the Institute of Directors, is a harsh indictment of the state of small business finance, particularly as the election looms.
Despite the bank bailouts and some strong talking in the media, the current Government has in truth, been unable to exert any control over the banks whether it is the freeing up of small firm finance or simply curbing banker’s bonuses. Furthermore, there is nothing to suggest that a Conservative government will make any difference to this situation.
The fact of the matter is that banks are even more risk averse than they ever were and local bank managers are under extreme pressure from on high to improve margins and avoid risk. Many banks have spent the last year going through their loan books and simply squeezing existing customers by raising interest rates in some cases to almost loan shark levels.
Taking on new loans, whilst a risky business, is their business.
Having spoken to bankers further down the food-chain, who on a day to day basis deal with new applications, it is clear that they are working in an environment that makes it almost impossible to make lending offers.
Banks always played an important role in the provision of finance to the small business sector and this should be even more so now they are effectively public owned.
Whilst some lip service has been paid to the availability of funding for small business, the truth is that small firms are finding that the flow of finance has literally dried up.
Banks, their directors and senior employees appear to have only one thing on their mind and that is to look after themselves.
The popular press are combining this failure to lend with the recent raft of bonus announcements. I have got no problem with people earning a reasonable amount of money and being paid bonuses for good work. What concerns me more is the failure of the banks to do what they are supposed to.
Howard Graham is CEO and Founder of The Made Simple Group – a group on online businesses that have been specifically developed to make things truly simple for small and start up businesses. The Group includes Companies Made Simple.com, the UK’s leading online company formation website. Howard is also on the BBC’s Small Business Panel of Experts – and you can ask Howard a question about your small business here.
Taking on new loans, risky business, their business.