loans

It is fashionable these days to criticise and knock banks. Most people think that they caused the recession and many feel that they have not changed in the last few years. The media are happy to promote stories about evil banks causing small businesses lots of trouble.

But is this the reality in 2011? Lloyds Banking Group have recently put out some figures that do not seem to have been widely reported and also seem to show that the press view and the actual position are far apart.

For instance this year Lloyds alone lent £9.6Bn to SMEs out of a total of £32Bn to all UK businesses. They report in their bulletin, “ Supporting UK Businesses,” that they are on track to fulfil their part of the Merlin agreement for business lending. In fact there was a 2% growth in business lending year on year by Lloyds in its core Commercial sector. Further they have approved eight out of ten requests for loans and overdrafts this year.

Of course there will be exceptions to the rule. There will be stories of small businesses being turned down for loans and overdrafts. However, in the experience of this author, most times this is due to an inadequate business plan being presented making the loan simply unaffordable.

Whilst we have quoted Lloyds Bank figures, anecdotal evidence indicates that other banks are in a similar position and have upped their game considerably.

It is essential that if you are seeking financial help to develop your business that you work with your local bank manager, to make it easy for him or her to approve your request. We work with SMEs to help them develop a viable business strategy and financial plan that will simplify the process of obtaining financial support from the banks.

If you would like help with your business plan or just want someone to review it before you submit it to the bank contact Bob Francis on 07941 426807 or email us

A recent article in the Daily Mail suggested that small businesses are hoarding cash because they fear overdrafts could be slashed at any moment.

However, isn’t it more likely to be the issue of personal security – business owners are just not interested in offering personal security for what in many instances are relatively modest sums of money, required on an intermittent and short term basis.

What are overdrafts and loans for?

You get the impression that the banks are trying to re-establish the principle that overdrafts are essentially for managing cash flow and that loans are for working capital. This distinction was blurred until recently due to the banks’ historic attitude to risk that has recently toughened, and the risks and time-scales are different in the two cases.

You need a good business plan

But, whether it is for an overdraft or a loan, a good business plan is required to present to the bank, but they are not the same plan – they have different objectives and time-scales to reflect the issue being addressed and the associated risks.

And you will probably be asked for personal security – that’s the rub!

And these days, the plan should include also considerations of personal security or other security as we know increasingly the banks are looking for that, on top of a good plan.

So that’s the rub – no matter how compelling is your business plan, and no matter what size of loan or overdraft your are looking for, you are likely to be asked for personal security or some other form of security to hedge the bank’s risk.

Banks should go back to taking some risk

But it is no surprise that business owners who already have a huge personal stake in their business, don’t want another charge on their own assets.

Business owners want the banks to go back to taking some risk at least for a small overdraft, if the business case is sound. And if the banks say they are doing that – you have to say that is not the impression given.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, or your business plan, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

Are banks really that bad?

Why are small businesses not borrowing from banks?

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