Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Monday, October 13, 2008

Will things change?

In the past week I have heard directly two stories of where bank lending has been withdrawn at very short notice just as happened in the early nineties. Fortunately neither of these were Insight Associates clients, although we have had this happen to one situation we have been working on - but that was to be honest not a huge surprise. There can be no doubt that banks are getting tougher and money is harder to find.

Then as if to confirm it, last Wednesday I heard a senior manager with HSBC's Special Situations Group (where their problem customers end up) tell a meeting of the Turnaround Management Association ("TMA" - of which I am a director in the UK) that their referral rate had trebled in the last three months, and they were expecting much more to come.

I have been saying recently that businesses should make their bank manager their best friend! This may seem odd, but if you want to avoid getting on your banks target list surely a good start is to get close to your manager and make sure he/she has everything they need. Are you up to date with providing information and are you complying with all of the conditions and covenants in your bank lending. If you can make your manager comfortable about your business, then there is much less chance that they will focus on you.

But ..the title above is "will things change". Today (13 October) has been an historic and momentous one for the British economy. In effect two of our biggest banks have been part nationalised to save them from their past misdemeanours if you like. However part of the deal is ... to quote Robert Peston from the BBC:

"RBS and Lloyds TSB/HBOS have promised to the government that they'll maintain mortgage lending and small-business lending at 2007 levels - which is massively more than they are currently lending (this is hugely significant - given that a shortage of credit is to a large extent behind the economy's deceleration into recession levels)."

Mr Peston went on to say this evening that this cannot mean a return to the reckless personal mortgage lending that we have seen in recent times, but it should be good news for smaller businesses concerned about their credit lines.

Let's hope so, as more than anything a return to the situation of the early nineties where bank lending was withdrawn from so many business causing them to fail will make the recent events just the beginnings of our troubles.

My concern is, it is all well and good the banks making this promise (they, it appears, had little choice if they wanted the Government to bail them out - and it is a perfectly sensible condition to make on the deal) but how and who is going to police it?

These are difficult and interesting times and more than ever you need to ensure your business is in good order. We are happy to meet and review your position free of charge and with no obligation. Get in touch.

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