I never miss the opportunity to have a major rant against our friendly neighbourhood banks and their questionable business practices - and events in recent years have only served to consolidate my opinion.
Take, for example, the scandal of Royal Bank of Scotland; in February 2009, they posted the largest annual loss in UK business history - £24billion. Now this may sound unreasonable, but with a Chief Executive (Sir Freddie Goodwin) who was earning a reported £4million per year, I would have expected a slightly better performance, even in these difficult times!
And now that RBS has now been taken into public ownership, guess who will ultimately be responsible for these losses - you and me! But it gets worse...what was Sir Freddie's punishment for such glorious failure - early retirement and a pension of nearly £700,000 per year, payable from the age of 50!
Let's get this into perspective; with an average annual salary in the UK running at about £24,000 per year, it would take the average worker 29 years to earn the money that Sir Freddie will get in a single year - and he doesn't even have to get out of bed! Is it me, or does this stink of gross immorality? No wonder (at the time of writing) the Government is desperately looking for ways to cancel this pension arrangement.
And it gets worse - in the UK, the Enterprise Finance Guarantee Scheme is a new government scheme to guarantee up to 75% of any loan that a bank makes to a business. It is supposed to be available to businesses that do not have enough assets to offer banks as security for loans, but recent reports from the Federation of Small Businesses (FSB) and the Forum of Private Business ((FPB) indicate that businesses are experiencing major difficulties accessing the scheme, with the banks being less-than-helpful.
This isn't too surprising; the previous scheme that the EFG has replaced, the Small Firms Loan Guarantee Scheme, faced the same difficulties for many years. The banks conveniently failed to market it properly and many small business-owners who would have benefited from it were not even aware it was in place. Those who did were often made to jump through endless hoops in order to access it. But let's be clear, the Government has backed the EFG to the tune of £1.3bn and so if you are a small business owner looking for finance, don't be afraid to interrogate your Bank Manager about the scheme.
EFG is actually part of a package of Government measures called 'Real Help With Finance,' designed to assist businesses in accessing financial assistance. Other measures included in the package are:
- A £10bn Working Capital Scheme, securing up to £20bn of short term bank lending to companies with a turnover of up to £500m.
- A £75m Capital for Enterprise Fund (£50m from Government augmented by £25m from the banks) to invest in small businesses which need equity.
Of course, these all sound great, but, as the experience with EFG shows, the reality for most small and (especially) micro-businesses trying to access these funds may be frustratingly different. Still, knowledge is power and its worth knowing about all the potential options available if you are seeking business finance.
Raising business finance is not easy at the best of times and in the current economic climate, it is becoming increasingly difficult. But, as with all things in life 'difficult' doesn't mean 'impossible' and if you have a strong, viable business or business idea, you should succeed even though you now have to work a little harder.