Change On The Horizon For Business Borrowers? - Guest Blog
18th December 2014
Change On The Horizon For Business Borrowers?
There is something going on with the high street banks that is slipping under the radar, nobody is talking about it and it is rather enlightening.
Do you remember the days when your bank manager used to make a decision about whether they could lend to your business? This was commonly referred to as the ‘good old days’. Then circa 2007 it all changed, with lending decisions being made by centralised teams and your loyal bank manager being not much more than a note taker.
There is no doubt that this tightening of credit policy restricted borrowing for businesses, after all that was the intention. For some banks this has bolting the stable door after the horse had already gone, for others it was about preventing losses with a large blanket policy.
Well, something quite key is changing…
Over the last few months we have started to see some banks give lending authorities back to their frontline managers. This has seen some bank managers making lending decisions and self approving borrowing for their business clients.
OK, at the moment these local authorities seem to come with a fairly tight policy and definite limits on the amount of borrowing. However, it is the first step towards loosening the purse strings and could be the first genuinely positive sign of credit getting a little easier for businesses.
Interesting that this has started to happen with so much uncertainty in the wider world. It probably is less to do with the economy and more to do with banks driving their P&L. Crowdfunders and Alternative Lenders are grabbing market share, especially at the smaller end of business borrowing so something needs to happen in response.
Probably the biggest reason for giving bank managers an ability to sign off and approve business borrowing comes from a few areas;
A need to be quicker in making decisions
Limited resources in their own credit underwriting teams
Businesses wanting smaller finance amounts for different reasons
Ultimately each bank needs to service their client’s needs. No difference to any of us really. The big thing is that maybe, just maybe, we are seeing a realisation that businesses are not quite so loyal to their bank than they were in 2007. The last few years have taught businesses to look at wider funding options, this has changed levels of expectation and bar has been raised.
We will wait and see what happens in 2015, but there are some very small signs that business borrowing is just starting to get a little simpler.
By Dave Farmer
Dave Farmer is founder of the award winning independent business finance advisory, Lime Consultancy.