The banking sector has often been accused of favouring big business over small and medium sized businesses (SMEs.) It certainly seems that way. From speaking to SMEs on a daily basis, it appears that high street banks still say an emphatic ‘no’ to smaller businesses seeking finance to grow, or even to renew broken or out-dated equipment.
While we know that banks have been badly affected by the tumultuous recessionary years, they do seem to forget one fundamental fact: SMEs are the very lifeblood of our economy. Now it seems that high street banks may be hindering smaller businesses from gaining access to finance from alternative providers and forcing them to take out business accounts to get a loan. Delays in financing may put the company under undue financial pressure and lead them to taking out more expensive borrowing than necessary. This may simply because they need to replace vital equipment and don't have time to go through all the hoops that the banks want them to!
More diversity and competition in the banking sector is vitally important if we are going to have a lasting recovery built on business investment and exports.
A new survey, commissioned by Chancellor George Osborne, will reveal that smaller companies still feel that they are being shut out by the banks when it comes to lending. The survey, undertaken by the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB), will rank the different banks based on how well they are meeting the needs of small companies.
It’s good news that the Government is backing a new and independent website called Business Banking Insight (BBI) which is designed to give clarity around the services smaller businesses receive from their banks. The website will identify how SMEs rate their banks based on performance, service and business understanding. The review was launched in November, under the remit of identifying the best SME bank in the UK, as well as providing data to allow SMEs to find the bank most suitable for them. It feels like this is too little too late, however, as SMEs are looking at getting back on track right now for recovery.
We ask our twelve SME business owners in the next Business Jury (www.businessjury.co.uk) whether SMEs are really getting a fair deal from banks.