I’ve just returned from an interesting roundtable this morning at Experian’s offices at 80 Victoria Street, London, where the issue of bank lending to small and medium sized enterprises (SMEs) was very much still on the agenda. Stephen Alambritish, from the Federation of Small Business (FSB) said that many of his organisation’s members were dipping into their savings at the moment, rather than asking for new loans because the cost of finance was still high. Indeed two thirds of his members surveyed recently said they had not even asked for credit as they either didn’t need it (at the high prices) or they were expecting a no from the bank anyway. Paul Ross, director of retail banking at the British Bankers’ Association responded with the latest BBA figures showing that net lending in 2009 has risen every month this year, except for the traditionally slow July and August holiday period – even then £574 million of new lending was still made in August. Stephen did agree that SME lending is up and there was a lot of debate about how to achieve a mutually beneficial relationship but Stephen did reiterate his worries about the cost of credit, in terms of arrangement fees, renewals fees, the rates and so forth.
Others present at the gathering were Rachel Hunt of Financial Insights, who stressed the need for more investment in software systems at the origination point of business lending and crucially more aggregated back-end systems that can provide a 360 degree overview of the situation and better risk management. More automation to free up face-to-face staff was also called for by Experian’s Stephen Gildert, an ex-banker himself who worked for 20 years as a relationship manager for Lloyds, so he should know what he’s talking about here. With the government likely to keep the pressure on for banks to lend more to SMEs to support the economy in these recessionary times the focus on lending is unlikely to lessen any time soon, so any technology systems that provide better risk management at less cost are likely to be welcome.
The three key themes of the roundtable were:
• the use of data, and especially how it will be utilised next March when commercial business data can be shared among banks and credit reference agencies, much as it is currently is for consumers, to aid lending decision-making.
• Automating the lending process.
• How you can combine these things in these tough times to ensure better risk management, smart lending and reduced running costs.
To download a copy of the Experian ‘Risk, reward and the SME lending imperative’ report, which formed the basis for much of the discussion and highlights the opportunities available to retail banks in this area (which they might as well explore while the government is pushing banks to lend) please click here