The Norfolk Chamber, together with the British Banking Association, recently held the annual British Banking Association Dinner for Norfolk. The main debate centred on access to finance and allowed local businesses the opportunity to raise any concerns on this issue. The guests included representatives from the major high street banks and Norfolk Chamber members from across the business community.
One year on from the last Norfolk dinner, the overall perception was that nothing much had changed, but this is not the case.
The banking world is moving forward, albeit in small steps, more importantly these steps are positive. Since the banking crisis, many of the chairs and chief executives for the leading UK banking institutions have been replaced. Bank governance and the risk elements of lending have all been reviewed. New fail-safes have been implemented, including ring-fencing retail finance from the investment sectors of the banks.
The result of these measures is that the legal criteria which the banks have to work within is more rigid and the banks are now trying to get a better balance between lending and borrowing, as well as concentrating on being more open in their dealings and regaining the confidence of the business community.
SMEs were recently asked about bank lending. 13% stated that they were discouraged from seeking funding from their bank and 12% said they did not trust banks in general and would not use them for funding. Despite this perception and, whilst the banks have a duty of care to lend responsibly, only 1% of SME’s were actively discouraged by their bank from seeking funding, due to bad risk. The same results also showed that in the second quarter of the year SMEs had obtained new borrowing facilities of £5.9bn and banks continued to maintain approval rates of more than 8 out of 10 lending applications.
Similarly the business community should not automatically look to the ‘traditional’ route of the bank as the only source of access to finance. Alternatives to the usual lending routes could be considered. Routes such as ‘angels’, credit unions and equity finance are all possible alternatives that might be better suited for a particular business’s needs.
The days of automatic access to finance are gone and the businesses should also be responsible in their approach to lending. SMEs should ensure they have done their homework and a solid business plan is a ‘must’ when approaching a funding source. Amazingly only 6% of SMEs take professional advice when looking for finance.
Support mechanisms, such as SME mentoring services (www.mentorsme.co.uk); and the Funding for Lending scheme, designed to stimulate the economy by making cheaper loans available to firms and individuals; are supported by the British Banking Association to help drive economic growth. The recent announcement of the formation of a National Business Bank is also another positive step.
The British Banking Association dinner provided an ideal opportunity for the banks to understand the concerns of the Norfolk Chamber business community and to discuss ways in which the banking world and local businesses can work together to promote prosperity and economic growth in Norfolk.
