Regulatory Changes Needed So That Smaller Banks Can Hold Their Own against the Giants; Partner at Gambit Corporate Finance Frank Holmes and Alex Griffiths, an Undergraduate at the School of Management of Cardiff Metropolitan University, on Why Smaller Lenders Need a Level Playing Field in Providing Finance to SMEs
Byline: Frank Holmes and Alex Griffiths
MANY SMEs feel that large high-street banks are unwilling to lend to them.
This is the persistent gripe of many owner-managed companies despite government intervention.
The reality is that bank lending to businesses is falling. For eight consecutive months lending has decreased, and is now at the lowest it has been for three years.
The big banks are preoccupied with their large portfolios, toxic debt and satisfying regulatory capital reserves requirements.
These priorities deflect attention and probably kill an appetite for new lending to SMEs.
The lack of advances from high-street banks, however, has opened up the market, prompting asset finance specialists and smaller investment funds turned banks, to up their game.
These smaller firms operate under bank licences and due to the shift in bank sentiment are able to implement strict lending criteria; which has not stopped the borrowers coming forward.
In the UK, there are 234 banks excluding building societies and overseas banks. The irony is that it is the large banks that have stopped lending to SMEs, instead choosing to lend to smaller banks and asset finance firms, so that they can then lend to the SMEs the large banks did not want to engage with.
Smaller banks such as Aldermore and Close Brothers specialise in providing asset finance for hire purchase and leasing, as well as invoice finance allowing SMEs to unlock capital when fast access to funds is needed. …