Merlin banks ‘should stimulate demand’
THE FAILURE of the ‘Merlin’ banks to lend as much as they promised to SMEs is down to a perception gap between the two, and business groups are demanding the banks do more to stimulate demand.
The banks agreed with the government in February to increase lending to SMEs to £76 billion, which equates to £19 billion in the first quarter, but the figures had fallen £2.2 billion short.
The banks’ insistence that funds were available but demand was falling short gained support from Steve Walker of Aston Reinvestment Trust, which makes small loans to businesses that have been turned down by traditional sources.
He said demand for ARTs funds were also low, due to small businesses paying down existing debt, and the belief by owners that they would be truned down for loans.
He said: “Banks have been lending less to small businesses, but I agree that the demand from SMEs simply hasn’t been there. Banks are sanctioning at the same level, but I know they’re 50% down on demand.
“That’s still the banks’ own fault, as the atmosphere over the past three years has led SMEs to fear that when they go to the banks for help, they’ll be told ‘no’.”
Christine Braddock, president of Birmingham Chamber of Commerce and Industry, said: “While today’s figures do not indicate an improvement in credit conditions for small businesses, the banks should do more to take the message to customers. The banks are believed to be trying to stimulate demand for new borrowing but these figures indicate they need to do more.”
Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said it backed up what the Chamber was hearing from members.
She said: “Banks are saying the money is there to lend and businesses are saying they cannot access it.
“What we really need to see is old-fashioned relationships developing again between the banks and their business customers and we are seeing evidence of those relationships on our patch.
“But there is no denying that one of the single biggest issues raised at Chamber events is still access to funding.”
But Richard Butler, regional chairman of the CBI, said: “I’m visiting many companies and the issue of finance and bank leading is not being mentioned by many of them. It is however important that the main banks continue to make the necessary levels of finance available to SMEs which demonstrate sustainable business plans.”
A survey for insolvency body R3 showed that despite increasing confident around sales volumes and profits, growing numbers of businesses were worrying more about access to finance.
Nationally, nearly a half (46%) of the small businesses surveyed express concern about bank loans and other finance debt, compared to 34% in the previous quarter.
