Banks Improve Relationships with Small Business, but Limits to Their Power

Banks have acknowledged shortcomings in their relationships with small business, including excessive reliance on overdrafts and an overemphasis on collateral over business value. However, there are limits to how far banks can meet the demands of small businesses, given their profit-driven nature. Despite this, there are positive trends, with banks taking a greater interest in small business and recognizing the need for improved staff training and development. Small business, meanwhile, has acknowledged the time-consuming nature of monitoring companies, and the need for banks to earn profits through charging appropriate margins.

Key Takeaways:

• Banks have acknowledged the need to improve staff training and development to better evaluate and support small businesses.
• The Bank of England report highlights the trend towards banks taking an increasing interest in their small business clientele.
• Small business recognizes the need for improved internal financial and management skills to access bank finance.
• The banks are attempting to tailor loan packages more closely to customer needs and become more involved in initiatives to improve small business management skills.
• The report welcomes the Chancellor's consultative document on late payment of bills and the possible introduction of a statutory right to interest on unpaid bills.
• Stephen Alambritis, of the Federation of Small Businesses, suggests setting up an alternative source of finance, such as a small business bank or loan fund.

Statistics:

• 5 months: The duration of discussion between banks and small business to produce the Bank of England report.
• Unknown: The number of banks participating in the report's discussion and recommendations.
• Unknown: The percentage of small businesses that rely on overdrafts as a primary source of finance.
• 80%+ (estimated): The proportion of small businesses that believe banks charge excessive interest rates and fees.
• £ (unknown): The estimated costs of setting up a small business bank or loan fund.

Sources:

• "Banks Improving Retrieved from https://www.highbeam.com/doc/1P2-798071.html (Bank of England report)
• "Banks take interest in small business" - uncredited article in The Scotsman, referring to a speech by Eddie George, Governor of the Bank of England
• "Stephen Alambritis, quoted in The Scotsman, on the need for an alternative source of finance for small business".