Weekly Blog by Philip King, CEO of the ICM - 'Banking on insurance'

There was an interesting piece in The Times on Monday talking about business lending by banks and a proposal for a Guaranteed Repayment Insurance Policy. Apparently the scheme would involve the issue of an insurance policy that could be purchased by a small business and offered to banks as security for a loan. The Government's new Business Bank is considering offering a subsidy to insurers under which it would underwrite 15 percent of the cost of any default.

The theory is that such an offering would remove one of the obstacles to business lending when the collateral demanded by the banks is so high that the taking out of a loan becomes prohibitive or too personally risky for the borrower. Small business owners would, it is thought, be more comfortable paying the premium than putting their home on the line as security.

BIS says it is only currently looking at the proposal and has made no commitment, and I agree it is right to be looking at new and innovative ways to increase the flow of money into a much needed part of the economy. I can see the attraction to a small business whose owner is fearful of losing his house if the enterprise fails but, given the paucity of cash available to businesses in their earliest days, finding additional money to pay for an insurance policy on top of all the other overheads will be a challenge.

As always the devil will be in the detail and I have no idea what the pricing model might be but I'm afraid I'm a bit sceptical. It already worries me that someone can start a limited company with no business knowledge, no awareness of their obligations and responsibilities as a director, and no capital. This scheme would, I fear, encourage the taking on of an additional expense in return for lower personal risk at a time when the business is least able to afford it. The consequence of that will be reduced profits - or increased losses - and a greater propensity for failure.

Weekly Blog by Philip King, CEO of the ICM - 'No man is an island'

I've just left a board meeting of the Start-Up Loans Company and never cease to be amazed at what can be achieved by a small group of people pulling in the same direction. Indeed, I may have quoted Winston Churchill words in a previous blog: "Never doubt that small groups of people can change the world. In fact it’s the only thing that ever has."

 

The first board meeting was only six months ago and, since then, an infrastructure has been pulled together, Delivery Partners have been appointed, a significant number of loans have been advanced, and some big challenges have been overcome. They've been overcome by a committed group of people pooling their talent and resources, and coming up with solutions, and it's fascinating to see what can come out of a two-hour meeting with real focus.

 

At ICM HQ, we're doing some work here to ensure our management team is as effective as it can be because we know that an effective team can make a real difference. One of my favourite quotations, and one I frequently repeat at HQ, is: "Creative thinking makes it possible; teamwork makes it happen.” Wherever you are, whether you are at work or at home, whether part of a large group or small, we all invariably work as a team. It is teams, more than individuals, which turn ideas into reality.

 

No man is an island after all!