Banks putting on the squeeze ...04th October 2008
Keith Steven, Managing Director at our good friends KSA Company Rescue has highlighted on his Blog an article in the Telegraph Online on Thursday about the banks lending policies.
In a survey produced, significantly, before the events of the last couple of weeks the UK banks stated that they would aim to reduce the amount of credit they would offer businesses and consumers. Reporting that losses and defaults were already on the rise, they indicated that lending criteria would be tightened and they would look to improve their margins through higher charges. This predates the recent turmoils, so undoubtedly it will be even more the case than it might have been.
This certainly confirms our recent experiences, where propositions that would have been relatively easily fundable a year or so ago are now proving to be very difficult indeed to get any interest in. We have also seen changing attitudes with credit insurers, which will not help matters either. It therefore is critical that you keep close to our bank contacts and manage carefully any existing facilities so that it is not at risk at renewal time, or even before. The common reaction is to fear the bank, and whilst there may be reasons to do this, most often not keeping your bank in the picture only gives them good reason to be concerned and pull their facilities.
Keith points to the need to ensure you are in control of your business, and he is absolutely right. Now more than ever it is critical that your business has good quality up to date financial information (like timely monthly management accounts that allow you to make good quality decisions about your business), and that the focus is on cash management and preservation. Given this it continues to stagger me how little attention this is given by directors, who are often far too complacent about the information they receive - if any at all!!
We at Insight Associatesare expecting to get increasingly busy over the coming months as businesses wake up to the fact that their financial management and control is weak and they need to do something about it - and fast! Now more than ever services such as our Outsourced Finance Departmentare an essential ingredient in running a strong business that can weather the coming storm. It is going to get tough undoubtedly, and only the strong and prepared will survive.
If you want to look at the full Telegraph item you can find it at http://www.telegraph.co.uk/finance/economics/3125502/Banks-plans-for-lending-cutback-will-tighten-the-screw-on-businesses.html