The New Business Bank(s)

I so hope that these putative financial institutions will be significantly more entrepreneurial than the current bunch of second-raters in the debt finance industry who purport to support the “s” end of the sme sector and, frankly, don’t.  Also, I remain in the dark as to how any government-sponsored scheme (of which there is about to be another) actually gets the money to where it should be either efficiently or at all.

On the latter point, the two sad thing are (A) that such darkness isn’t confined to “Yours Truly” and (B) that cash alone will not solve the recessionary issues currently facing business.

Leaving aside the need for clarity coupled with simplicity from the Department for Business, Innovation and Skills, I am partially encouraged by the appearance on the horizon of new lenders.  That said, I struggle to establish what will differentiate them from the current bunch.  I recall Bank of Scotland’s massive entry into the sme sector and we all know how that ended up.  I fear a repeat performance of hope, lending, coupled with almost blind faith in pre-existing management, all ending up with a bad-debt hangover the size of, well, Europe.

So, here’s a few thoughts for those promoting such new banks:-

  1. only a fool does the same thing twice and expects a different outcome;

  2. more businesses go bust on the way out of a recession than on the way in;

  3. no-one should reinvent the wheel – but how clever was the chap who put two wheels together on a frame??? That was genius!

Over thirty years ago, in completing the examinations of the Chartered Institute of Bankers, I well recall the importance of a business’s management being stressed and stressed again as a key factor in any lending decision.  I am sure at least some still consider it of sufficient importance not to be lost amongst the radar clutter of life insurance and other targeted ancillary services.  So, to add to the financial institution’s one wheel (money) let me offer up the second, including the bike frame…Management support.  I know NatWest tried this (and probably still have it available) but I did get the impression that it was all rather prescriptive and that business owners felt that they were being spied upon.

Against this background, I suggest at least one of these new lenders hitches its waggon up to one of the national networks of independent management consultants already adept at supporting family-owned and managed businesses and, in lieu of an arrangement fee, insists that the business supplements its management with someone who, from his or her experience, can assist in taking the business towards to goals upon which the business plan was predicated.

Somehow I doubt banks old and new have the vision but I hope I’m wrong.  In the event that I am wrong, my slice of humble pie will be to offer to put this second wheel on their bike properly…Will I be killed in the rush?

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