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The Banks.....like getting blood out a stone!!

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Weeyoyo

New Member
I've got to laugh at the High Street Banks continuing to say they are open for business for SME's.

It's an absolute joke. Despite having our business plan for several months, securities available and a cash injection from the directors our bank still couldn't give us a decision on our funding requirements.

Thankfully our accountants came up with an alternative funding package which we are delighted with - low rates, minimal securities and the opportunity to tell the bank to politely forget it.

Rant over for today.

Garry

Lavazza Coffee Bean and Coffee Pods Suppliers, Discount Coffee Beans :: NextDayCoffee.co.uk
 
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Edward

New Member
Gary, I was reminded of your posting when I read in The Herald today of the sad news that the respected Scottish house builder John Dickie has been forced by the bank into receivership. The Herald reports:

"A company spokesman said: “John Dickie Group acted responsibly throughout the property boom, during which many housebuilders and property developers, fuelled by the bank as lender and investor, demonstrated extraordinary excess.”

He went on: “It seems that self interest and the ‘too large to fail’ principle is dictating who the bank is prepared to continue to support, as Dickie’s sensible land-buying policy and modest borrowings do not now appear to merit the bank’s support."
 
Employment Law Services

Employment Law Services

EmployEasily Legal Services
Rhymes with banks.....starts with a 'w'........

I speak to fellow business owners almost every day and very few have anything postivie to say sbout the banks......the tight economic climate has made running a business tough enough but with banks failing to support SMEs whose business plans can clearly demonstrate they are a viable, going concern, has made things even more dificult and in some cases impossible as evidenced by the John Dickie situation.

Not sure what, if anything, this new coalition gov't will be able to do but it strikes me that instead of bailing out the banks who clearly failed to run their businesses properly, the gov't would've been better off offering SMEs, the real engine room of the British economy, similar sort of funding through low/no interest loans and/or grants.

Imagine the impact an injection of >£50- £100k would have on an SME!

Instead, we're faced with a tight fisted bankers and the prospect of a VAT increase.
 

Boxby

New Member
Speaking off the record with a bunch of bank managers the other day, and basically their remit is that they can only lend money to businesses that have good cashflows, and high levels of profit - ie those that don't need it!!
 
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Lindsey Sharratt

New Member
The banks don't really want to lend at the moment and they don't have their normal levels of capital on hand to play with - hence, by only being prepared to lend to those who don't really want to borrow, they can claim to still be making money available but they never have to actually give it out!

I could not understand why the opportunity was missed to force the bailed-out banks to make a contractual obligation to lend x amount to SMEs as part of the bail-out package. It's disgraceful that so many healthy and viable businesses are going under as the result of short term cashflow problems.

If you look back at economic history, the banks will swing back from cautious to greedy and we will have the same cycle again - albeit one can hope with better regulation!
 
johnthesearcher

johnthesearcher

New Member
Some great points made above.

Lindsey makes the valid point that ....... " could not understand why the opportunity was missed to force the bailed-out banks to make a contractual obligation to lend x amount to SMEs as part of the bail-out package. It's disgraceful that so many healthy and viable businesses are going under as the result of short term cashflow problems."

Both the ousted government ministers and the banks have a lot that they should be FORCED to answer for.

The situation - it would appear - is about to get a lot worse for the creative SME sector as we are speaking to business colleagues every day who are contemplating 'giving it up' as there is no incentive to struggle on - economically speaking.

The bitter irony is that when that happens and the bankers complacency really takes hold then we will have a lot more foreclosures, loan defaults, redundancies, people claiming benefit, which will have a significant impact on the 'growth' phase that is the buzzword for the 'coalition' ministers.

In an effort to close on a more positive note I sincerely hope that pressure will be brought to bear on the banking situation with increased help and support to the SME sector.

John
 
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Lindsey Sharratt

New Member
I have experienced the same among people that I know - the comment was made to me by a friend that he has run his own business for years and never asked for any help, yet when he ran into tough times last year the banks did not want to know, and when he made enquiries about getting help from the state in the short term, it seemed the easiest way to do this was to fold his business. We certainly don't encourage people to help themselves with this attitude and I can see why a lot of SMEs have thrown in the towel. Like most of these, my friend was experiencing a short term cashflow problem and there was no viability issue with his business.

I join you in hoping that the new government will provide some support to SMEs who bear the burden in good times and seemed to have all support withdrawn in the bad. I think the change of regulation will help but that we need to go further. If we are looking to sustain long-term growth, then lending by the banks is critical.

I agree totally that both the previous government and the banks should be accountable for their actions - I am sceptical as to whether this will happen but there is a moral obligation to do it. So many mistakes were made on an enormous scale that we will have to pay for over a long period of time. I'm not even going to get started on the idiocy of the timing of selling our gold reserves.

The main positive that I am taking at the moment is that a lot of us are still here and hopefully can support each other through a recovery. Let's hope the government and banks will do the same.
 
Adventurelife

Adventurelife

New Member
There is two sides to this story. I am 100% in agreement that their are viable businesses going to the wall due to cash flow issues that the banks will not support. Also businesses are getting overdrafts called in that is making them fail. The banks are failing in their duty without doubt.

However, over the last several years as we have been expanding and also for others I have run the rule over many , many businesses with a view to purchase. I can assure you that their are many , many SME businesses that I would not lend money to so I understand why the banks do not when they see the financial state of many businesses.

The reality is when a business is in financial trouble it is very , very unusual for the owner or the in place MD to be able to fix it. It more often than not requires an individual with no ties or history with the business. Banks know this.
 
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Lindsey Sharratt

New Member
The reality is when a business is in financial trouble it is very , very unusual for the owner or the in place MD to be able to fix it. It more often than not requires an individual with no ties or history with the business. Banks know this.

That's a very valid point. As Einstein said, "The significant problems we face today cannot be solved at the same level of thinking we were at when we created them." It is much easier for me to look at the issues in people's businesses than it is for them to see the problem themselves as they were involved in the situation which took them to that point - and also because they have much more emotional involvement.

I do understand that the banks have to cover themselves against future losses and that they are now being cautious - it's just a shame that they seem to throw the businesses with short term cashflow issues and those with fundamental problems into the same basket.
 
Adventurelife

Adventurelife

New Member
I do understand that the banks have to cover themselves against future losses and that they are now being cautious - it's just a shame that they seem to throw the businesses with short term cashflow issues and those with fundamental problems into the same basket.

Again I am not supporting banks here, and I know all businesses have cash flow issues but again 9 times out of 10 it is the business owner or management who are at fault.

In business when you get down to it you only have to do two things

1. Sell a product or service that people value
2. Ensure you get paid on time

Everything else comes after that. When I have looked at the books of many businesses with cash flow issues they have got to where they are because their payment collections systems were rubbish.

If you have a lot of money due in the last place you should be spending your times is at the bank asking for more credit, all your time should be devoted to cash collection. Get the cash in and it gives oxygen to the business to allow it to breath and improve.

Having said the above I have seen the banks pull the plug on a few viable businesses recently.
 
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Gouldie0

New Member
If you have a lot of money due in the last place you should be spending your times is at the bank asking for more credit, all your time should be devoted to cash collection. Get the cash in and it gives oxygen to the business to allow it to breath and improve.

Having said the above I have seen the banks pull the plug on a few viable businesses recently.

Good point about credit control and business owners do have to be responsible to a degree but I still feel the banks should be held more accountable. There the ones who throw money at us when the good times are (were) here but there the first to slam the closed sign on the vault door.

No matter what happens the banks will ensure there making a profit, any taxes on banks will merely be passed straight onto the average joe customer and to me that's what stinks most.
 
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Lindsey Sharratt

New Member
I agree with both the previous posts, bad record management and a lack of control over cashflow has caused problems with a lot of otherwise solid business who had never really had an issue before and failed to get on top of it when things got tough and clients stopped paying or paid late. I'm MAAT so I'm really hot on keeping track of the financials, but I appreciate that a lot of MDs/owners focus on their core business and don't keep enough of an eye on the cashflow. I always recommend strongly in these cases that they should hire a competent book-keeper if they or their staff cannot keep up with this side of things themselves, and make sure they pass over their paperwork.

The banks will always look after themselves, unfortunately they know we need them more than ever at the moment.
 
Scottish Business Owner

Scottish Business Owner

New Member
Some really interesting points here and alot of it I agree with. Peter being probably one of the most experienced business people on here is really seeing it at the coal face and it's a problem I come across myself regularly with my background in finance. Many businesses are just so highly geared that their business models have become unviable.

Small business will lead the economic recovery and I think it's a real shame that there are not more incentives to encourage more people to go in this direction and to encourage established businesses to grow their businesses. It may happen in some shape or form but it's certainly not widespread.

All we can really take from the banking crisis is the hope that we learn from the mistakes and that this is never repeated. As many have pointed out we will all pay for this over the next few years.

Banks will always make money in one shape or form as others have said but they are a necessary evil for every business. No one will forget what the banks did for a very long time but I think we all need to look forward now and see what ways we can help each other to move things forward. It would be great if SBF could play a part in this :)
 
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Lindsey Sharratt

New Member
Hooray to that sentiment, I have a lot more faith in my fellow business owners than I do in the banks :)
 
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DickW

New Member
The banks have never been particularly supportive of smaller companies but much preferred to lend to hedge funds, private equity companies and companies (generally foreign) that were taking over our indigenous companies. In addition, few of them ever contributed to venture funds that invest in start-ups, spin-outs etc and when they did it was token amounts.

The situation now is of course even worse and it will not get better because the Govt isn't prepared to take them on.
 
Adventurelife

Adventurelife

New Member
It has been a bad weekend for business in Scotland with Woods of Perth and Peter Scott of the borders both going int administration. Nearly 200 jobs at risk

Both are old companies that managed to ride the highs and lows for many years but this downturn got them.

No idea of the banks role in the above but would be interesting to find out.

Peter
 
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Lindsey Sharratt

New Member
That's very sad news Peter.

It would be very interesting indeed to find out the banks' involvement in this, especially given that both were well-established companies.
 
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DickW

New Member
From what I can tell the banks weren't involved. Reading some other forums it would appear it was mainly the state of the market in both cases. Apparent Peter Scott's has been looking for a buyer for a while and Woods just ran out of steam.
 
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Edward

New Member
all businesses have cash flow issues but again 9 times out of 10 it is the business owner or management who are at fault

Adventurelife I see where you are coming from and yes a lot of cash flow issues are to do with the business owners (but 9 out 0f 10?, I wonder what data exists on this?). What we are talking about, nevertheless, this time around is different, and IMO is about the lenders and not the business people.

Everyday anecdote such as illustrated above, and reports from professional associations, intermediaries etc. all strongly attest to banks simply refusing to lend without reference to the merits of the particular business case. The James Dickie episode is a case in point.

I’m afraid that homilies about 'what you have got to get down to in business' might be true, but they wilt into irrelevance in the face of socially and economically irresponsible banks (who by the way, seem to have learned nothing from all of this – aka continued bonus culture).

Linsay Sharrat was correct in indicting the previous Government as well as the banks. It was surely blindingly obvious that the banks, having screwed up their own balance sheets would gobble up all and any public funding to repair those balance sheets. The Government ought to have exercised competent stewardship over the taxpayers’ money it literally just handed over to the banks.
 
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