James Hurley’s article this week in the Telegraph ‘Entrepreneurs “fear” approaching their bank’ struck an interesting note with several discussions I’ve been involved in recently as well as our own experience particularly in relation to international consultancy work.
Earlier this week I was in a discussion about balancing and increasing the equity in a small business. The simple solution available to those involved was to offer a stake in a commercial office letting company also owned by some of the directors. The stumbling block however is that the bank borrowing that financed the office development has been in place for some time and any attempt to alter the current structure is expected to be met with a significant change in terms, for the worse. Not surprisingly, to quote from the article, “Fear of repricing or withdrawal of existing facilities continued to discourage many small businesses from approaching lenders altogether,” seems to fit the situation exactly.
My own experience of discussing with the bank the cash flow issues that arise from overseas consultancy work have been very negative and at a time when UKTI are encouraging Globe to re-energise this aspect of the business I remain concerned about any discussion that might prompt the bank to reconsider the facilities that this business has had in place since the company was formed in 2006. James reported the shadow business secretary Chuka Umunna’s comment: “It is deeply worrying that small businesses are being put off from applying for finance because of fear that existing facilities will become more expensive or be withdrawn”.
I’m not sure about fear but extreme caution is certainly one of the things that comes my mind when my thoughts turn to banks.