Banks and businesses need to forge an alliance
It is imperative that banks and businesses find common ground if the economy is to achieve a sustainable recovery, a leading business group has argued.
Addressing an event in Manchester designed to bring both sides together in an effort to tackle the problem of business credit, Phil Orford, the chief executive of the Forum of Private Business (FPB), said that the time for blame was over.
Instead, he told the audience of bank representatives, business leaders and company owners that failings on both sides should be acknowledged and that now was the opportunity to discover common interests in order to stimulate economic growth.
Mr Orford said: “Forget the bashing and the blaming. We are talking about enabling or disabling our recovery – it’s now that serious. Businesses and the banks need to take a critical inward look and accept that the days of easy credit have gone.”
Recognising that businesses need to think objectively about how they appear to potential lenders, Mr Orford urged small firms to implement a range of measures in order to improve their creditworthiness.
These measures included offering assets as security, methodically preparing business plans and managing both business and personal credit ratings.
On the other hand, Mr Orford told the banks that they had a duty to reach out to small businesses.
He said: “You deal with most if not all small businesses. You have access to them and communication with them – at your fingertips. You have the resources to make a difference. The smallest businesses do not.”
Additionally, the FPB wants to see banks place greater emphasis on localised services, which would include lending decisions made by on-the-spot managers so that credit assessments are fairer and more accurate, and to put a halt to the closure of local branches.
Mr Orford continued: “Many communities continue to experience branch closures – even when the branch is the last bank in town.
“This disenfranchises businesses from the major retail banks for business transactions and relationships, especially in rural areas. If the banks are committed to serving businesses and their local communities, this closure strategy must come to an end.”
Mr Orford also called on the banks to improve what they offer to businesses: “We need to see new products for business that are relevant for our time.
“Flexible products – maybe even bundled products – which allow borrowers to switch around for use at the appropriate time. Technological advances must enable faster process at reduced cost to business – particularly for the smallest – and I would cite faster payments as an example.”