No part of the UK has been isolated from the impacts of the recession. Northamptonshire has suffered economic setbacks like any other County. SMEs are the lifeblood of the UK economy, and the last two years have not been easy.
When talking about this topic it is important to note that each SME is different, they have their own unique needs and requirements. It is easy for people to talk homogenously about funding without understanding the mechanics involved.
A lot is talked about with regards to the availability of finance for SMEs. When you place initiatives such as the government’s enterprise finance guarantee scheme and European investment bank funding together with existing bank balance sheets and product sets, there are probably more finance options available to SMEs than ever before. It is ultimately a question of demand and the level of credit demand will reflect the pace of the economic recovery and customers’ use of debt in their financial plans.
Today we see a greater combination of funding lines in support structures than before. People are mixing asset and invoice finance with debt, ensuring that they are correctly funded and using their capital wisely. It is very much a case of financial products moulding to the customer, rather than trying to mould a customer to the financial product. We also continue to operate in an environment of historically low interest rates, and this should continue to be a benefit to businesses for the foreseeable future.
At NatWest/RBS we have set out a customer charter for our SME customers. Our aim is to ensure that our dealings will be conducted in an open, focused and transparent way. It is not about changing our approach, it is about reinforcing our current policies and talking the opportunity to see what additional support can be provided.
The charter includes a combination of a committed twelve month overdraft and price promise. Since this introduction at the end of 2008 – today, nine out of ten small businesses have had their overdraft facilities renewed at the same or a lower rate.
Most successful businesses adapt, and this should include their approach to financing their business as well. SMEs need to get themselves fit and ready, a finance review can be part of this activity.
It is likely to be a slow climb out of recession without an immediate return to periods of strong rapid growth. However there does need to be caution with optimism. Throughout the recession a number of businesses have had to make painful decisions, but having gone through this, a great many businesses should now be in a better shape.
We seek to provide practical advice as well as finance support. We have introduced an online business knowledge hub, offering support and advice to avoid the pitfalls and plan for opportunities ahead. Here businesses can access interactive business reviews, economic reports and potential guides.
With pressures in a recession focusing on cash flow it is understandable that businesses are addressing concerns about their balance sheets and looking to pay down debt as opposed to taking more on.
From our own perspective, as a bank we are approving 85% of all business applications for credit, nationally providing currently new loans to over 5000 businesses per week. Indeed to reemphasise the point that customers are not utilising agreed borrowing we have just under £43bn in credit facilities that remain undrawn by our business clients. This appears to show that nervous markets creates nervous investors, but I would advise that as a bank we have the capital to meet the lending commitments we have made, but the right amount of debt for business will be greatly influenced by the pace of economic recovery
Andy Ellis, Director, Business Banking, NatWest, Northamptonshire