Posted in: Finance
Carry on banking!
By Rob Downes - 14 June 2013
Infamy, infamy, they've all got it in for me – no doubt the thoughts of many a banker up and down the country recently – Stephen Hester among them.
But well they might have a bad reputation. Having caused untold damage to the UK small business scene thanks to their finance-thrifty ways, our latest member research suggests small firms are now feeling the pinch from high bank charges.
You know the ones: the missed payment date, the returned standing order, the one for going slightly over your agreed overdraft limit - they tend to mount up pretty quickly. Especially when money’s tight, you know, when your bank’s just lowered your overdraft limit, or called it in completely. The same bank who won’t give you a loan you desperately need for something important to your business.
We polled our members on attitudes to banks in several key areas, with ratings from one to five. One being no issue, to five being seriously damaging, with anything over 3 classed as harmful to their business.
Bank charges scored the highest here with an average rating of 3.6 – up from 3.23 on identical research we did in pre-crash 2006. Likewise, collateral requirements – that is loan security – averaged 3.2, up from 2.88; and reduction or calling in of loan/overdraft was up from 3.16 to 3.5.
Perhaps not surprisingly the availability of finance saw the biggest leap, going up from 2.43 to 3.3 – another indicator that bank lending or lack of it is harmful. In not one of the indicators did the banks improve – that’s pretty poor by anyone’s measure.
While everybody knows the banks are still shy to lend, this research also reveals a palpable fear among business owners that their credit could be withdrawn. If a business overdraft is withdrawn or reduced, it’s the removal of a safety net which then exposes the business to charges if they run in to unexpected cash flow issues at a later date.
Do you see where I’m going with this?
It’s common knowledge that the banks are looking to repair their balance sheets and a cynic might say this is one way of achieving that. Because the banks aren’t making huge revenue on loan products, could it be the banks have engineered a situation able to make up the shortfall?
It’s impossible to say, but we know the banks will do whatever necessary to protect themselves, and with EU legislation protecting consumers from excessive bank charges, maybe businesses have ended up in their sights? Maybe it should be the small business owner quoting classic Carry On.