There Is Finance Available for Firms with Sound Plans; in the Wake of George Osborne's Project Merlin Announcement, Barry Evans, NatWest and RBS Commercial Regional Director for South Wales, Looks at Access to Business Finance and Why Small Companies Should Not Assume That They Will Be Refused Credit
Byline: Barry Evans
THERE has been much talk about access to finance, following the Chancellor's Merlin announcement on banking. I cannot agree more that it is vital to Wales' economic recovery that SMEs understand what finance options are open to them. Crucially, businesses need to be talking to their bank as early as possible.
In a recession, with pressures on cash flow, businesses are reluctant to invest, and often look to pay down debt rather than take on more. We currently have just under pounds 50bn in undrawn credit facilities in the UK, which suggests that nervous markets create nervous investors.
Money is available to credit-worthy businesses, however it appears many companies who have credit facilities in place are reluctant to use them.
A bank's role is to provide debt finance. We are not in the equity or venture business; we look at current trading patterns to establish credit-worthiness and viability. We are asking more questions than we were three years ago. If we weren't, we would be doing our customers - and the taxpayer - a huge disservice.
Many smaller businesses can find it challenging to demonstrate viability, but we cannot lend to a business if we are not confident we will be repaid.
We look for management teams that recognise opportunities.
Sector knowledge, financial acumen and a good portfolio spread of customers are all elements that we consider when establishing viability.
Throwing more debt at a problem is seldom the right solution.
Some businesses are basing their strategic decisions on an assumption that credit applications will be declined. Companies must overcome this reluctance to request credit and talk to their business manager as early as possible. When you consider initiatives such as the Government-backed Enterprise Finance Guarantee Scheme (EFG) and European Investment Bank (EIB) funding, together with existing bank balance sheets and products, there are probably more SME finance options available now than ever - yet banks continue to face criticism that businesses cannot access finance. …