In Focus: Banks attempt to demystify lending
Richard Abbott hears that banks still have some way to go to win over small businesses.
You have to feel for banks. They are falling over themselves to declare they are "open for business", while emploring companies to apply for funding.
Yet the overriding perception in the market is that banks are a closed shop; they are failing small businesses at a time when entrepreneur-driven growth could point our battered economy back towards recovery.
Their plight is the epitome of the 'rock and a hard place' scenario: on the one hand, they must shed their association with irresponsible lending, on the other they are being asked to invest in small businesses that in many cases have yet to fully establish themselves.
So I was intrigued by an invitation to attend the latest in a series of roadshows by the banking industry's Better Business Finance campaign, where big guns from Barclays, HSBC, Lloyds, RBS and Santander sat shoulder-to-shoulder on a panel that also included Angela Knight, CEO of the British Bankers' Association.
The event was attended by a modest number of small businesses, many of whom came armed with verbal hand grenades to lob at the panel in the open Q&A section.
While the assembled national banking figures were understandably on-message, they weren't there to simply soak up the criticism and wring their hands. They even chucked a few combative responses back, with Peter Ibbetson from RBS labelling an accusation that banks fail to use common sense as "offensive".
It is clear that the biggest challenge for banks in this area is that small and medium businesses feel all lending decisions are made by computers and faceless credit committees, with their local relationship manager lacking the authority to make decisions.
James Cliffe, divisional director at Barclays Business, admitted there was a mentality of 'computer says no' among small businesses but he was at pains to point out that scoring systems are just a guide, and the findings can be overturned by local managers.
Stephen Pegge, director of commercial at Lloyds Banking Group, speaking to me ahead of the event, said the challenge for banks was one of communication with their business customers.
"You should be dealing with the person that has the local heritage, the traditional relationship," he said.
"We say 'yes' to about 80 per cent of credit applications. We could do a better job of explaining that."
You have to applaud the Better Business Finance roadshow initiative, which has already visited Sheffield this year, even though the modest turnout drew one local businessman to directly criticise the organisers for what he considered as ineffective marketing. Sometimes you just can't win.
Demystification of the bank lending process and better understanding of the "new normal" lending environment is exactly what is needed.
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