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.

Successful business leaders have all the information they need to make good decisions…Do You?

Saturday, August 15, 2009

Are the banks causing businesses to fail?

Comments from the Forum of Private Business (FPB) this week are suggesting that the banks general reluctance to lend is causing significant business failures.

The second quarter of 2009 saw a 39.1% rise in compulsory and voluntary liquidations of companies in England and Wales, and at the same time the Bank of England reported that lending to small businesses had dropped by a staggering £14.7bn in the same period! Research by the FPB suggests that businesses demand for finance is not being met by supply and in fact the banks are continuing to refuse to support even apparently good businesses as they perceive too high a risk.

Even when funding is available it is becoming increasingly expensive with margins of six percentage points and above over the base rate now becoming almost the norm.

Some would suggest that the banks are just taking a sensible line after perhaps some years of being a little reckless, and the businesses failing to get support are perhaps simply not viable in the first place! However whilst there may be instances of this, it is more likely to be the case that the businesses concerned just need help to get them through a difficult period. Many current leaders of smaller enterprises have never managed them through periods like this before, and need help support and guidance not a ruthless approach. That has certainly been more often than not our experience in recent months.

Let's see a return to sensible relationship banking and local managers being empowered to make decisions on the ground rather than the box ticking mentality that seems to prevail now.

It is also interesting to note the increasing statistics that seem to appearing recently about how badly all of the various Government support schemes appear to be working! With the notable exception of the Business Payment Support Service which I talked about again recently, all of them seemed to be failing to deliver. Indeed Mark Prisk MP, Shadow Spokesman for Business & Enterprise who spoke at our Bishops Stortford Breakfast Club last week said that the £2.3bn Automotive Assistance Programme had so far not given a single pound to the sector!

Whatever your view, the reality is businesses need help through these difficult times. Both in terms of real cash, management guidance and financial management support! The consequences of not getting this right could be disastrous.

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