Business – UK 200 slams banks’ lending

Banks are lending #4bn unnecessarily to small and medium-sized businesses because of poor financial controls, and the total is rising all the time, the UK 200 Group said this week.

David Turnbull, chief executive of the group, which represents small and medium-sized firms of accountants, said inadequate controls were causing over-lending to growing businesses by banks and other institutions.

That need not have been lent had there been more effective cash flow-management structures in place,’ said Turnbull.

The group bases the figure on the findings of more than a hundred of the financial control reviews that its members conduct of businesses on behalf of banks and extrapolates the findings over the estimated one million growing businesses.

Turnbull said businesses needed to improve their credit-control management by invoicing earlier and more regularly, and conduct more credit checks to counter ‘seat of the pants syndrome’.

He added: ‘The effect of this is not simply on business but also on the banks. As long as they are unnecessarily lending #4bn or even #1bn they are inevitably exposing themselves to risks and losses and the downfall of the business in the future. If they address the issue now before they get to or approach insolvency, the potential for business failure could be avoided.’

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