We are constantly bombarded with “facts” regarding business confidence up/down, lending up/down, interest rates to go up/down etc etc etc. The UK finance industry is one of the worst offenders to this and I constantly receive e mails and newsletters saying things like “we are lending more than last year” “there is no demand for small business loans” and stuff such as 85% of applications are approved.
Unfortunately these statements “hide” some truths.
1. Let’s say you owe your bank £100,000 on a loan and want to increase this by £10,000. They will probably say something like (If they want to lend) “Why don’t we roll up the loans into one easy to handle transaction?” If you agree then they have lent you £110,000 not £10,000 (and are therefore “lending more than we did last year”!)
2. If you go to your local manager with an application he or she will then look and see if it has any chance of succeeding. If they think it has legs then they will do all they can to get the application approved. Normally alot of time and effort goes into this process by both parties. It then goes to the mystical “underwriters” in their cave somewhere. They then reject say 15% of applications because they don’t want to take a perceived risk or they think the application is no good. So instead of saying hey we reject loads of applications from our own managers who really believe in their client’s dreams/wishes we accept 85%. Sound better?
The thought of Vince Cable and his cronies getting involved in all this fills me with dread and fear.
Perhaps we could someday go back to a system whereby the bank manager was a local person, who knew and understood his clients and would lend to some and not to others but was led by his skill gained in 30 years or so of “local banking”. The computer never had a chance with small businesses! And still shouldn’t.
It seemed to work for 200 years.
I’ll put my tin hat on.
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