CFI: News Review


Recovery rests on the shoulders of SMEs it’s good news that politi-


by Rob Lankey, head of lending, Aldermore Commercial Mortgages


When Business Secretary Vince cable spoke to a Parlia- mentary business committee recently, he said that if banks did not increase their lending to small and medium sized businesses then the uKs eco- nomic recovery would suffer. cable said: “there is an is-


sue with the supply and cost of finance and it is inhibiting recovery.” the government is under-


standably concerned that economic recovery may fal- ter because business is being starved of desperately needed funding. in the same meeting, cable threatened banks that if they do not increase lend- ing to Smes, the government will take “further action with tax on banks”. He continued to explain that the tax could be imposed in the form of a tax on profits, balance sheets or bonuses. this outburst was brought


on by the news that the big five banks failed to hit their first quarter lending tar- gets under Project merlin. although the banks have been set an annual target to lend £76bn to Smes in 2011 (which is not divided into quarterly targets), in order to be on-track the banks should have lent approximately £19bn after the first three months. the actual figure was


£16.8bn. cable concluded that there was now a “catch- up element” involved in achieving the desired result.


cians recognise the impor- tance of both Smes to the economy and of kick-starting bank lending once again. However, it’s also interesting to note that one of the gov- ernment’s flagship schemes, the enterprise Finance guar- antee Scheme, has yet again fallen short of hitting its tar- gets to help small businesses. the value of loans of-


fered under the scheme fell by 11% to just £92m during the first quarter of this year, down from £103m in the fi- nal quarter of 2010. the aim of the scheme was to encour- age banks to extend credit to small businesses. as part of the scheme, the government guarantees part of the loan and, in exchange for the guar- antee, the government takes a fee from the small business. Lending under the scheme


peaked in the second quarter of 2009 and has been steadily declining since then. Lend- ing through the eFg scheme is now just 36% of its level just under two years ago (£255m in the second quarter of 2009) and 49% of its level at the same time last year (£187.6m in quarter one of 2010). Which is a great pity be-


cause the scheme has noble intentions but clearly lacks teeth. Perhaps the govern- ment should consider re- freshing the scheme, by in- creasing the amount of the loan covered by the govern- ment guarantee and reducing the size of the fee payable by participating companies? it’s all well and good Vince


cable berating banks for not lending enough to Smes, but perhaps the government also needs to put its own house in


order? revitalising the eFg scheme would certainly be one very tangible and imme- diate way of demonstrating that the government is seri- ous about supporting small businesses.


Every little helps it needs to be remembered that the big five banks who participate in Project merlin are not the only show in town. there are dozens of smaller financial institutions dedi- cated to serving the needs of Smes and they are, perhaps, more in tune with the needs of small firms because they have more direct contact with them. as Vince cable acknowl-


edged, the big banks have gradually moved away from “relationship banking” which means that “at a time of cri- sis like this they don’t have the infrastructure in place to assess the risk of lending to small business”. i can confirm from first-


hand experience just how important it is to be close to your customers. i suspect ev- ery broker reading this article will also echo that sentiment. But as well as really under- standing potential borrow- ers’ markets and financial re- quirements, banks also need to be willing to find solutions to tricky applications, rather than simply consigning them to the in-tray marked decline. For example, in a signifi-


cant percentage of the cases received at aldermore, we frequently go back to appli- cants with an offer that is a modification of their initial proposal, but which meets their needs and enables the deal to be done. i wonder


how frequently big banks are willing to do that, or whether they simply say ‘no’? our approach not only


works for us but also works for Smes and does its bit for the economy. in the first quarter of this year, alder- more increased its lending to Smes by 14%, meaning we now have outstanding loans of £468.7m. Yes, it’s a relatively small contribution to a very big target but, as the country’s leading grocer reg- ularly reminds us every little helps!


From little to


large RICS recently warned that, throughout the world, property agents remain downbeat about the outlook for the commercial property sector. In its quarter one 2011 Global Distressed Property Monitor, RICS says that in two-thirds of the countries surveyed, agents are expecting a rise in the number of distressed properties coming onto the market (distressed means a property under a foreclosure order or is being sold by the mortgagee). In the UK, the level of


distressed property coming on to the market rose in the first quarter and agents expect this trend to continue throughout the second quarter. However, as I reported in this column last month, London continues to buck the national trend and the commercial property market in the capital remains strong.


mortgage introducer JULY 2011 57


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