Business Lending – Signs of Change for SMEs?

Business lending has never been easy with banks. The fall in the last quarter of 2013 of insolvent companies incurring debt problems and entering into receivership may have been a sign of a sea-change in the way banks are treating the SME customers or it could be masking something else. The latest figures for Q1 of 2014 are due later this month and I’m sure they will make for interesting reading. It will be interesting to see if the banking trend for resisting calling in SME loans and overdrafts across the UK continues and easing the debt burden. I don’t buy the fact that banks not calling in commercial loans and overdrafts of so called ‘zombie’ companies is affecting their ability (the banks) to lend to more profitable companies. They don’t lend enough in the first place commercially to be affected by the removal of these ‘zombie’ company debts.

By the way I don’t like this term ‘zombie’ company as it implies the companies are dead on their feet by choice, when a better description is ‘cash-starved’ companies. OK there are some SME’s who admittedly should not be managing their own affairs, but they are usually the first to admit it. The majority of companies are still starved of cash caught between the ‘perfect storm’ of large companies paying late and the banks who in the past have simply not supported SMEs where they should have.

Whilst this may be changing, it is too early in my opinion to say the recession is history and everything is wonderful in the garden again when big companies are still hanging on to cash. If you look at some of the named and shamed in the Forum of Private Business’ bad payers it is quite shocking as to the size of these companies. Sainsbury’s is a typical example who wrote to its suppliers without consultation that they were increasing payment terms from 30 days to 75 days. Even Dell one of the largest companies in the world has increased its payment terms from 50 days to 65 days on the basis it is standardising all its payments.

These are shameful examples but there are lots more of them that can be seen on the FPB website and if you want to nominate another you can do so there too.

My own hope is that the banking ‘boardroom’s are finally getting the message that they need to be more cautious of what is being communicated to the press. The press may have its faults but they are a wonderful mirror to hold up to business and in particular the banks. The reflection may have severe consequences at the grass roots level and I am hoping this is the case.

Having worked with banks for quite a long time they are like the Titanic when decision making and take forever to turn away from a designated course, but once they do change course they can power ahead quite quickly. Let’s hope this is the case and we see banks leading the way in improving services to SMEs.

 

 

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