Weekly Blog by Philip King, CEO of the ICM - 'Forced lending - no, no, no!'

So Britain's largest banks have finally signed up to a series of pay and lending reforms http://tiny.cc/sbhgo, and whilst I don't especially want to add to the exhaustive comments made before and since the announcement, I was rather captivated by the interview with Vince Cable on Radio 4's PM.

The interviewer, Eddie Mair, was making the point forcibly that the Government has no real power as a result of the agreement and still won't be able to 'force' the banks to lend to small businesses. We know ourselves that the banks' record at supporting businesses is not as good as it is claimed to be, and getting the top level thinking down to local management is similarly not as effective as it might be. We know also that SMEs are not as good at producing credible business plans to support requests for funding as they should be, nor as good at collecting cash due to their businesses as they need to be.

But more than this: we know that the Government doesn't deliver initiatives in a way that makes them easily understood by business, and its follow-through is usually poor; and there is a disconnect between the views of the small business organisations and the views of the banks about the reasons and causes of the funding availability issues.

And yet despite all this, please don't tell me that the banks should be forced to lend to small businesses.

Yes, encourage them to understand their small business customers better and provide them with best advice. Yes also be supportive and imaginative in the help they can provide. But force them to lend? NO, NO, NO

I have seen several examples where a bank's refusal to lend appears to lack logic, and they have made unreasonable and unacceptable demands of their customers. But I have also seen small businesses that are clearly in terminal decline, blaming the banks for their woes when it's obvious that lending more money would only have delayed the inevitable insolvency.

Please let's make sure we don't forget the basic principles of good credit management - you don't lend more than a customer can afford to repay and you drive profitable sales while protecting your business against unnecessary and avoidable risk.