FSB column: Banks ‘have a duty to help small businesses
PUBLISHED: 06:00 12 August 2014 | UPDATED: 16:25 12 August 2014
The politicians assure us that the recovery is under way, with even those not in government grudgingly agreeing that after six difficult years the economy is at last moving in the right direction.
Businesses in our region should welcome that good news. Even the perception that things are improving is enough to boost confidence, helping businesses of all kinds to thrive.
But while there is anecdotal evidence in the business world of better times ahead some commentators are warning that the recovery is still very fragile.
From talking to our own members the Federation of Small Businesses knows that firms, and especially the smaller ones, are still finding the going very tough. And not least among their problems are relationships with their banks.
When the global economic crisis first hit us back in 2008 we heard from many small companies that their lenders suddenly became risk-averse, demanding repayment of all or part of outstanding business loans.
In some cases this even happened to businesses which were flourishing.
For successful businesses as well as for struggling ones, this clampdown had a serious impact on their ability to grow, or even to continue trading.
Thankfully the government eventually recognised this problem, and made more funds available to encourage the banks to start lending again.
Now the banks assure us that more business lending is a reality.
One of them placed an advert in national newspapers recently, saying: “We understand that lending is fundamental to supporting British businesses.”
But from where I stand this appears to be little more than hype. Easier credit is not reflected in what we hear from FSB members.
The same bank declared that its lending to businesses was increasing by five per cent a year, but the cynic might suspect that this is from a very low base.
What our members report is that bank lending is still extremely tight. No one wants a return to the bad old days but businesses do need access to capital.
Whether you think the banks are still holding onto the nation’s purse-strings too tightly, or you believe what was in the advertisement, other things the banks are doing are decidedly unhelpful.
Any business which relies on a bank for capital for growth, or to tide it over occasional cash flow problems, wants to have a good working relationship with the business specialists at their local branch.
This leads to a better understanding by the bank of their business and their needs, which in turn helps to develop trust.
But if you run a business, the opportunities to call in at your local branch to discuss your needs are diminishing, as more and more branches close.
The decision by Barclays to close its Needham Market branch, the town’s only remaining bank, is just the latest in a long list of closures.
Even if your bank still has a branch near your premises you may still not be able to talk to a business manager there, as some of the banks seem to think it is better if they are based many miles away. A bank which relocates its business relationship managers from East Anglia to Birmingham clearly does not expect them to retain a deep understanding of the issues facing businesses in the town.
In a few months’ time the FSB will hold another of its banking forums, bringing local businesses face-to-face with their banks. Let’s hope that by then there will be less reason for us to criticise the way they treat the people who keep them in business.