The purpose of my original post Banks aren’t supporting credit easing for small businesses was to share our experience applying for a bank loan.
Based on this experience I want to set out how I believe priorities need to change to support lending to small businesses in the UK.
The world is still suffering the fall out of a global debt crisis which is far from over. It seems strange that creating more debt by lending to businesses is a solution.
However, if it is loaned to businesses that are creating new innovative products and services then it is a good idea. If it is loaned to businesses with a track record of growth then it is great idea. If it is loaned to businesses who operate in markets with huge potential then it is a superb idea.
I believe that banks need to look beyond their standardised view of a business formed by box filling historic financials into a model. In a growth business these numbers are quickly out of date. They need to expand their criteria for lending. They need to identify the next generation businesses that are going to make the UK competitive again and answer these important three questions:
- Is there an innovative new product or service or an innovative approach to an old product or service?
- Is there a track record of growth to date? i.e. is there proof that this innovative idea has legs?
- Is there a market for this growth to continue?
If the government is set on returning the economy to growth then more pressure needs to be put on banks to invest in growth businesses.
Innovative growth businesses with potential.