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Are the banks really not lending?

The thoughts of Richard Osborne on many subjects over the years.

Are the banks really not lending?

This morning I was at a breakfast meeting and bumped into my bank relationship manager from RBS whilst I was mid conversation with a relationship manager from Clynsedale Bank. We were having a discussion about, as if anything else, the banking situation in the press, Government funding, and the banks calling in of overdrafts and loans.

I had an interesting round table debate at the Chamber of Commerce a few weeks ago where I found myself, only initially, standing alone defending he banks. Almost all business owners around the table were very upset about the stories of banks retracting overdrafts despite none of them having experienced this first hand. An accountant in the room voiced concern that funding was becoming harder to obtain for his clients, and all in all the banks were not being seen in a very positive light. In the end I felt I really had to speak out…

Around that table I said the same thing that I said to the bank managers this morning, are they really not lending any money? I actually believe they are, in fact I know they are, and they are now doing things correctly .. which to be honest they should have been doing in the first place!

My wife and I identified an opportunity for a Buy2Let last night. We done the maths and this morning I spoke to the bank, by this afternoon we have a mortgage approved and we’re about to embark on our first investment property venture. Yes we needed to demonstrate we could afford it, yes we needed to put a chunk of our own money in, and yes the bank has a nce big bit of security over our home to cover our ventures; is that really a bad thing?

Here’s why; a stranger walks in off the street and asks you to lend them £1,000 for a share bet business idea because he knows it will work. Would you hand over your own £1,000? Probably not, but if that person had a fully thought out business plan, was putting in half the money themselves, and put up a bit of security to back you up, then would you? If nothing else, it focuses their mind to work a bit harder when their neck really is on the line, shows some commitment on their part, and makes them really think about their business first. Isn’t that what the banks should have always done before lending money every high risk punt before getting us into this mess?

Personally I can speak from experience, the banks are lending money both commercially and personally, they’re just being sensible about it now and that can only be a good thing. Before starting on any venture it will always need careful consideration, and if your business model in sustainable and you have the security to back youself up the banks are likely to support you.

One Comment

  1. Mar 26, 2009

    All to often I hear this that banks don’t lend anymore. As you quite rightly point out Richard they are but are now adopting stricter but also more responsible criteria. However, they are in a no win sutation, Jo Public and Small Business Owners want the money, moan that banks are irresponsible yet want a return to the times which got us in this mess in the first place.