Member Article

Lending inquiry may not be damning of the banks

Tees Valley chartered accountants and business advisers Waltons Clark Whitehill believe an investigation into lending to businesses may not prove as damning of banks as commentators might expect.

The new Competition and Markets Authority, which replaces the Competition Commission and the Office of Fair Trading next month, is set to investigate the issue.

However, Heather O’Driscoll, Managing Partner at Hartlepool-based Waltons Clark Whitehill, said: “I think a lot of people will be expecting this to be a bank-bashing exercise, but if the investigation is fairly conducted then I think a broader picture will emerge.

“From the business we have done with clients, there have been two forces working together to drive down business lending. One is certainly that any new or renewed lending has been on stricter terms, with the criteria for lender coming from the central credit rather than local bank managers .

“The other pressure has been a lack of confidence within many businesses to actually borrow money during recent years and we are only just coming out of that. The sad thing about this is that many businesses have been surviving using their reserves, and have now reached the point that they do need to borrow to push their businesses forward as it is well known that more business go under when they are coming out of a recession.

“Key to obtaining lending is good management information, monthly accounts, cashflow forecasts and a business plan. If you have these and can show the business will be successful then in general the banks will be supportive.

“If the results of the investigation show this to be the case on a wider scale, I think many people will be surprised, especially if the findings are aired in a balanced way, because it can be all too easy to simply attack the bankers for not lending but there also needs to be a demand for lending as well. The key as always is supply and demand”.

This was posted in Bdaily's Members' News section by Waltons .