Why Aren’t Banks Helping Businesses with Capital?

The attitude of most banks and finance providers when dealing with requests for a loan or finance deal, reminds me of the small boy who covers his ears when his parents are telling him something important, that he doesn’t want to hear, as he’s already made his mind up what he wants to do.

And anyone who is a parent will know just how frustrating this is.

AccountingWEB have just published a far-reaching survey into banking and finance, which reveals amongst other things, a high level of frustration level amongst accountants with banks and finance companies, and in particular that they have little empathy and understanding of their business customers or the financial information supplied by them.

A typical scenario is where a small business wants to raise some finance to buy assets or expand their business and is asked for three years Annual Accounts, a cash-flow forecast and other financial information. The business owner either doesn’t fully understand what’s wanted or doesn’t want to make a mistake, so brings in his or her accountant to assist.

Unfortunately the days of each large branch of a bank having its own in-house accountant are long gone and the imaginatively named ‘business relationship managers’ appear to base their decisions on some predetermined Head Office formulae, that most of them don’t appear to understand.

Very few businesses will tick all of the bank’s boxes, but that doesn’t mean the customer is a bad risk. This is usually where the accountant comes in to provide additional information and explanations to accompany the raw accounts data. However, my experience and from the results of the survey, the experience of the vast majority of accountants, is that what we supply is either ignored or not understood and I’m not sure which is worse!

Survey respondents reported a lack of understanding amongst the banking fraternity especially on their apparent inability to correctly interpret Accounts and fully understand the sector the business is operating in. The overwhelming opinion of accountants is that the big banks have cut their costs too far, particularly on training.

As one respondent commented, “very few businesses fit neatly into the standard box and there must be more flexibility shown by banks and that can only come from if the banker is properly trained and experienced.”

There was also a feeling of a growing distance from their finance provider and lack of personal touch, with another commenting: “Bring back the local bank manager to build links with local businesses.”

The survey also asked what one piece of advice accountants would give banks and finance providers, and the majority of respondents flagged up the need for much better quality customer relationships.

Along with relationship management, staff issues came up as a priority with one respondent saying: “Stop spreading managers too thin on customer ratio and bringing in ever younger staff with little knowledge,” while another commented: “allow your staff to develop relations with business. Train them then trust them.”

The survey also targeted business owners and Finance Directors, with the feedback from them being similarly customer-focussed with comments ranging from “be there for your customers”, “value your customer” and “Your best customers are the small businesses that have weathered the storm and are still here – you tend to forget that.”

The business community is also fed-up with the constant merry-go-round of constantly changing managers, with most businesses lucky to have the same manager for more than six months. At MJ & Co, our manager has changed six times in little over two years, with the bank concerned never bothering to contact us when this happens.

Aside from the above, the majority of comments from business respondents called for a simpler approach: with a plea for banks to be honest and straightforward. As one business owner put it, “Keep it simple and consistent so we know where we stand and please stop over complicating products.”

If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.

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