There has been plenty of hype this week with regards the banks seeming to miss their quarterly lending target to small businesses. They agreed to lend £76bn to SMEs this year, equating to £19bn per quarter, and the £16.8bn achieved to date leaves them 12% short http://www.bbc.co.uk/news/business-13489884.
I am conscious of not wanting to repeat earlier rants but there are one or two points worth mentioning. Firstly, you obviously can't assume one quarter is going to be the same as the previous one, so to simply multiply by four is naive. Secondly, the agreement was only announced in February when we were already well into the first quarter. Thirdly, and acknowledging that I am repeating myself, it's nonsensical to 'force' banks to lend.
The granting of credit is based on trust that the supplier will deliver the goods, services, or funds required, and that the customer will pay in accordance with the agreed terms. Banks, just like trade creditors, need to set their lending policy and criteria in order to maximise sales and profit while maintaining risk at an acceptable level. It was lending too much to customers who were insufficiently credit-worthy that contributed to the credit crunch in the first place both at a local and global level.
The 'disconnect' between the views of the banks, government, and business organisations remains, and the media takes the opportunity to exploit the differences at every turn. I for one wish we could see a more cohesive message being delivered to business. They should be more prepared to share information about their business so that lending decisions can be better informed; they should recognise that there is often cash (debtors) sitting in their business that could be released by applying good credit management principles; and they should consider other financing options beyond a loan or an overdraft.
And as for the government - and again as I have said before - they need to stop promoting the reduction of financial reporting under the misnomer of reducing red tape. Numbers still have to be produced so red tape is, at best, a fragile argument. Less information will result in less credit. It is a simple equation.
On that subject, the ICM 30-second survey has just gone live. Please let us have your views here.
Next week will be another guest blog by CreditManagement magazine's Managing Editor, Sean Feast, and I'll be back the week after.
I am conscious of not wanting to repeat earlier rants but there are one or two points worth mentioning. Firstly, you obviously can't assume one quarter is going to be the same as the previous one, so to simply multiply by four is naive. Secondly, the agreement was only announced in February when we were already well into the first quarter. Thirdly, and acknowledging that I am repeating myself, it's nonsensical to 'force' banks to lend.
The granting of credit is based on trust that the supplier will deliver the goods, services, or funds required, and that the customer will pay in accordance with the agreed terms. Banks, just like trade creditors, need to set their lending policy and criteria in order to maximise sales and profit while maintaining risk at an acceptable level. It was lending too much to customers who were insufficiently credit-worthy that contributed to the credit crunch in the first place both at a local and global level.
The 'disconnect' between the views of the banks, government, and business organisations remains, and the media takes the opportunity to exploit the differences at every turn. I for one wish we could see a more cohesive message being delivered to business. They should be more prepared to share information about their business so that lending decisions can be better informed; they should recognise that there is often cash (debtors) sitting in their business that could be released by applying good credit management principles; and they should consider other financing options beyond a loan or an overdraft.
And as for the government - and again as I have said before - they need to stop promoting the reduction of financial reporting under the misnomer of reducing red tape. Numbers still have to be produced so red tape is, at best, a fragile argument. Less information will result in less credit. It is a simple equation.
On that subject, the ICM 30-second survey has just gone live. Please let us have your views here.
Next week will be another guest blog by CreditManagement magazine's Managing Editor, Sean Feast, and I'll be back the week after.
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