SMALL FIRMS FORCED TO CHOOSE OVERDRAFTS OVER LOANS
I feel your comment on the CreditPal/YouGov survey missed a number of key points. First of all the recent credit/cash crisis has come about because of a lack of ability to assess and price risk of lending, credit or doing business. Many in supply chain management, finance and credit industry relied far too much on out-of-date statutory companies house annual filings and the recent crisis has highlighted this failing. What we are saying is that by SME actually preparing and supplying up-to-date management accounts will increase the confidence of the providers of credit and finance. This will be further enhanced if that information is standardised, validated and quality assessed. Then the real bonus is if the latest information is better than that filed at companies house. As more companies file their 2008/9 accounts and as the economy climbs out of recession, so the real attraction is that up-to-date trading/financial position should be a lot better and will show the business in the best possible light.
The key is to have a means by which accountability and transparency can be increased between those who require finance - UK business - and provider of finance/credit - banks etc. In this process it is more about building trust and managing expectation and this can only be achieved by UK business being more up-to-date in providing management accounts to external suppliers. The added bonus is that once they start to produce monthly management accounts, then they will be managing their own debtors - and suppliers better and that in turn will reduce overall risk of "doing business". After all this CreditPal/YOUGOV survey's other findings was that over 50% of UK businesses have lost money because either a supplier or customer has failed to pay.
Whilst, I appreciate that there are differing views of the public commitments made by the likes of Lloyds Banking Group and Royal Bank of Scotland with regard to business lending. However, they say they are open to viable applications and therefore the key concern for businesses should be to present a convincing and accurate reflection of their current trading position.
You rightly point out that seeking an overdraft from a bank manager who already knows your business can be an efficient way of sourcing finance. However, if businesses were to offer potential lenders access to stanardised, validated, quality assessed up-to-date monthly management accounts then there is little to suggest that a loan application process shouldn't be as streamlined.
As said, previously, businesses and credit providers must increase disclosure and transparency if we are to get the system moving. CreditPal is free to every UK business to be an easy, no cost way of achieving this. CreditPal analysis remains under the control of the SME yet can automate the supply of raw data, summarised info, analysed data or derived accounts ratios to banks when - and only when - the SME is happy their data is validated and accurate. Then this becomes the conduit by which banks can make it easier for businesses to understand the criteria behind their lending decisions because the availability and pricing of. Only through the two sides working together will they be able to invest and provide the foundation for a sustained recovery and to ensure that UK business thrives and prospers through availability of the appropriate finance and credit on the best possible terms that reflect real risks of doing business.
Chris Poll
CEO
Future Route
