16 Small businesses are
the building blocks of our economy. In this article, Irene
Graham from the British Banking Association
(BBA) discuss how those SMEs can be supported.
Irene Graham Managing Director of
ne of the economy’s most urgent needs to embed recovery is to increase confidence in business and their customers. In order for a strong and sustainable recovery to
really take hold, we need some good news to build momentum. Businesses need to know customers will keep coming through the door; customers must be confident to spend. Scotland fortunately has some good news.
The latest SME Finance Monitor – the most authoritative study of small and medium-sized enterprises’ attitudes to borrowing – indicates that SMEs in Scotland are more likely to be profitable than the UK average (68 per cent in Scotland, against 65 per cent UK-wide). Roughly three- quarters of Scottish SMEs are content not to seek finance, but for those that do 80 per cent of overdraft applicants are successful while 75 per cent of loan applicant have successfully obtained their loan (a higher proportion than the UK-wide 63 per cent). The average loan is around £15,000; the average overdraft is typically less than £5,000. Yet confidence in the economic recovery is
still low. Although the proportion of successful borrowing applications remains fairly stable, the number of applications is still suppressed by discouragement – the conviction that the banks are not lending. It’s the same as it is with households. When
businesses are worried about the future, they don’t take out new loans, but rather pay off old ones and build up savings. The entire SME sector has become a massive net depositor, with a surplus over borrowings rising from £8bn to £21bn over the past year - a huge cash stockpile. So the key responsibility for banks is not only
to keep providing the credit that SMEs need but to build demand for credit by doing their bit to restore confidence.
Business Finance at the British Banking Association
Businesses should be confident that their
applications to borrow will be scrutinised properly, and if they are declined initially they can appeal. The banks developed an appeals process, independently monitored by the lead reviewer Professor Russel Griggs OBE, and committed to provide appeals with a 30-day turnaround. Professor Griggs’ first annual report on appeals activity was published in May 2012: seven percent of appeal cases reviewed were in Scotland. We continue to work with SME representative bodies to deliver the message to Scottish businesses that this appeal process is now well-established and effective. The banks are also working with the Scottish
Chambers of Commerce to provide a business mentoring scheme. This currently offers support on a range of issues which affect SMEs, including finance, marketing and HR. Start-ups, growing and established companies from across Scotland can get in touch with trained bank mentors through the online portal
www.mentorsme.co.uk, which directs them to the Scottish Chamber who will match the business with the appropriate bank mentor. Later this year we will be developing a Scottish export mentoring club, helping to open the door on new business opportunities. So what we need now more than anything
else is to encourage businesses to unlock investment in order to build a sustained recovery. The UK’s banks are committed to playing their part in supporting Scotland’s economic recovery and growth: they are lending and approval rates are high. Now is the time to work together to add momentum to the businesses leading the recovery.
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