Banks must embrace regional lending intermediary service for viable firms, says FPB
The service, which is available via Business Link, provides intensive support for businesses encountering problems accessing finance once a need has been identified.
The free guidance and support is available in order to help forge stronger relationships between small businesses and banks.
According to the FPB’s recent Economic Downturn Panel survey, 66% of respondents said they would welcome more localised support from their banks. In addition, 61% want bank managers to better understand small businesses.
The FPB is urging lenders to pledge their support for the scheme. Figures suggest that many small businesses are reluctant to explore support schemes delivered by their banks out of fears of being classed as ‘high-risk’.
In all, 27% of respondents were concerned that applying for the Enterprise Finance Guarantee (EFG) scheme – the Government’s high-profile lending guarantee package for small businesses – would encourage this perception. In addition, 20% feared that borrowing would be further restricted as a result of their application.
“The lack of availability of credit remains a concern and the cost of finance is still high. Many small firms are being rejected simply because of their size or industry sector,” said Nick Palin, the FPB’s Director of Finance. “The Business Link financial intermediary service, delivered locally and for eligible businesses, is a welcome step towards helping banks re-engage with their small business customers.
“We are calling on the banks to get behind this initiative publicly so that viable yet struggling business owners are encouraged to explore the help that is available.”
One FPB member, who asked not to be named, welcomed the idea and said it could turn back the clock on bank-to-business relations.
The Oxfordshire-based technology firm owner identified the centralisation of decision-making at his bank as the main factor behind the breakdown of their relationship. He believes the introduction of this service could help to restore links between small businesses and their local branch managers.
The FPB member said: “I used to count my bank manager as a personal friend but now I don’t even know who he or she is – the only contact I really have with my bank is generally of the negative variety. It’s as though there’s almost a cold war between many banks and small businesses.
“I’ve heard anecdotal accounts of business owners avoiding all contact with their banks because they think it will only serve to disadvantage them. They think that by getting in touch with their bank, they will up their chance of having their overdraft reduced or interest rates increased.
“Putting in place an intermediary of some sort will surely help to resolve some of this and allow business people to ask things and get things clarified, without fear of repercussions. The banks should pledge their support without delay.”
FPB member Shelton Fernando runs the Shelley’s Hotel in Lewes, East Sussex.
He took over the business 18 months ago and has since turned it from a ‘run down’ three-star hotel into vibrant, four-star premises.
However, he is angry over the ‘really awful’ relationship he has had with his bank, saying it has made hundreds of thousands of pounds out of him in charges and interest payments, while constantly putting his finances under pressure. Mr Fernando welcomed the initiative to help small businesses deal with lenders.
He said: “I think it would be worth it because everything is better with negotiation.
“Running a business is one thing, fighting with the bank you can do without, so anything like this can only help the situation. They’ve been really bad at every stage and I’ve been complaining about it for a long time now, but nothing seems to get done.
“Banks are not helping small businesses to survive and when you ask them why they are doing it, they just come up with excuses.
“When we bought this place it was a three star, run-down hotel. Now after just 18 months, we have a four-star hotel yet the banks won’t give us the time to expand and see the difference.”
Mr Fernando added: “Last year, I was charged £16,000 by the bank because my accounts were late after my accountant had time off sick. When we have these sorts of problems they should show a little bit of understanding.”
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