The Practitioner wonders if the banks will step up when alternative financers start to struggle...
I’VE RECENTLY BEEN in the great industrial zone that is The North, attending meetings with banks and other finance companies.
It’s interesting to sit in with the banks and hear about how they are restructuring again, and still open for business. However, when push comes to shove, the best bit of advice they can give the client is to consider other sources of funding, such as Funding Circle.
We then proceed down the road to a funding house, who deal with invoice financing, loans, asset finance etc., and they say they don’t expect Funding Circle to be in existence for very much longer due to some bad deals they have allegedly seen being done.
They also said that banks are no longer interested in offering the traditional overdraft. This much I do believe. From our client bank, I would say less than 5% have a bank overdraft. Over 25% have or have had an EFG loan a bank loan, 20% have asset or invoice finance, and about 10% have used a crowdfunding, Funding Circle, option.
If I compared this to ten years ago, the percentage of clients who operated in an agreed overdraft would have been much higher.
I do see a benefit in having an actual bank manager – if they take an interest in the business and get to understand how the business operates. From my recent experiences the best bank managers in the high-street banks are those that are placed in the ‘special attention’ section to look after businesses in need of help.
The relationship managers are more like salespeople, who appear wet behind the ears with very little experience of business.
I tend to agree with the finance house, who stated that companies such as Funding Circle may not be around forever: while they make it so easy to get money, there are going to be business owners who take advantage of it. Whether they end up growing their business as a result, well, the loan company won’t find out until it’s too late.
You would hope the banks cotton on to this and make obtaining finance easier, and keep managers who know how to manage – rather than just sell.
The Practitioner’s uncensored thoughts come from within their own practice – having left a regional firm in the heart of England