“The reaction of banks to the financial crisis was to cut back on lending and to rebuild their balance sheets,” Arnab Dutt observed, but he is not convinced that things have moved on – at least, not sufficiently.
“Their lending criteria does not appear to have changed. It isn’t nuanced and they still don’t understand business. Five years on from the crisis in the UK, the system for small businesses hardly seems to have changed at all.”
He has not seen evidence that the high street banks have the same level of commitment as in “the old days”, the time that he describes as ‘proper banking’. It would appear that the main banks have a challenge on their hands, in convincing people like him that they really do mean business. But he sees positives from the situation.
“It has led to a huge growth in asset finance,” Dutt said. “The thing about it is – with asset finance, they have security: the finance company owns the machine till they have received the last payment. The lenders may not want to commit less than £150,000 but businesses can borrow at rates that are historically rather good. It makes sense and it is a good way of making capital investment.” He went on to say thay he is seeing lots of smaller companies going for asset finance and readily agrees that it is, in effect, hire purchase. But where do companies go for less than £150,000?
