We picked up a really interesting article about RBS and their willingness to lend to UK businesses, the article was based around a Sunday Times interview with RBS chairman Stephen Hester. The BBC article can be accessed here.
Part of the interview quote was “We are lending as much as we can….we cannot force companies to borrow”, a line which we found really intriguing.
Our experience shows that there are two main misconceptions when it comes to banks and business finance. Firstly, that companies think banks don’t really want to lend. Secondly, that banks think that companies don’t really want to borrow.
Somewhere between these two statements is a genuine misunderstanding of each other.
What We Think
Our take on the business finance and bank lending issue is this:
- That companies do want to borrow, but they are not communicating the why, how and what for clearly enough for the bank to understand
- That banks are not being constructive enough in explaining when they decline business finance, a decline should not be the end of the conversation but the beginning of another
In essence, the two sides are not talking the same language. In our opinion a large part of this is the bank’s responsibility. Over the last few years there has been a change in attitude from the banks that businesses should be grateful to be lent to by the bank.
OK, part of this is fair, but in any relationship nothing should be so one sided, as that is not how business works.
If RBS wants to lend more to UK business then the answer is quite simple, start appreciating what businesses really think of you, accept it as reality, then work with business to arrange finance as our experience shows that companies do want to borrow.
In the meantime the growth in alternative (and very good) business lenders continues, so when the lending climate does change the banks may no longer be a company’s first port of call when looking to borrow.
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