Recent event seeks to bridge business banking gaps

An event was recently held just outside Manchester where over 100 small business bank account holders joined with the business banking industry and Chancellor George Osborne in an effort to bridge gaps that have widened in regards to the availability of business loans.

The Doing Business Together event was an outgrowth of the February Project Merlin agreement in which the ‘Big Four’ High Street banks agreed to make working capital more available to small businesses by a rate of 15 per cent.  Despite the new resolution not all is well between financial services institutions and smaller businesses however.

Lloyds external commercial affairs head Stephen Pegge stated that business owners have been reticent to apply for finance due to a decrease in demand.  Mr Pegge added that firms were simply not pursuing business loans in the current economic climate due to confidence in sales shrinking and a dramatic decrease in spare capacity.

However Mr Pegge indicated that businesses also seem less inclined to be in need of emergency funding.  The Lloyds executive stated that overdraft activity across the sector is holding steady at a rate of 57 per cent – a rate that has historically been evident during times of solid economic growth.  Mr Pegge added that the recession rate is usually significantly higher and hovers at anywhere between 70 and 80 per cent.

However there were some business owners that indicated that things were not so rosy.  HCSS Education founder Howard Jackson stated that he had approached lenders for finance in February but was turned down.  Mr Jackson’s financial consultancy firm, which has a turnover of £2 million, offered both a personal guarantee and security to no avail.

The banks simply weren’t interested in taking on the account until the firm had received the needed funds from a handful of major contracts, said Mr Jackson.  He attributed the lenders’ behaviour as handing someone an umbrella on a cloudless day.

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