Thursday 17 January 2013

Funding for lending - the current state of play


Much has been said about this Government initiative and I have been very pessimistic - if not downright cynical – about the likelihood of this being a useful stimulus to small businesses. The headline figures were certainly bearing out my main contention that the most likely beneficiaries are going to be homebuyers with a slight easing of mortgage problems and a number of small business organisations have criticised the initiative for under achieving for small businesses. The problem is that it is tempting to comment on the headline figures and not look too much at the detail.The main reason for this is that it is not only difficult to get at the real figures but it is also a problem looking at a small range of figures over a relatively short period and extrapolating those into an overall view.
Think how long the average period a mortgage or business loan is taken over and then add in the size of the loan parc and you then see how long it is going to be to sort out the problem of lending in general.The figures are so enormous that they become so unreal they are difficult to comprehend. Movements in borrowing or lending are affected by so many factors that are not within the control of the banks, I give just a couple:Someone works for Jessops and loses their job because of the way the market has changed from cameras to smart ‘phones. They had a mortgage but can no longer keep up the payments so their house reverts to the lender. This becomes a bad debt but the house is sold for the value of their debt so it is cleared meaning a reduction in net lending.
Someone wants to burrow £5,000 to fit out a small café and approaches their bank for a loan. An unsecured loan is agreed at 16%. The parents of the café owner hear about this and look at the rate of interest they are getting on their savings and suggest they will lend the money at half the rate of interest.  The loan was available but not taken up.The second example is something that I am coming across much more when talking to start-up businesses so we therefore should be careful when looking at the figures, not just kicking the banks.
At this juncture it might be worth looking at what the main banks themselves say.

Santander

·         Claims to be actively embracing the scheme and is promoting the benefits of it to customers via a national  advertising campaign.
·         Net lending to business increased by more than £3.4bn in the past 12 months. 
·         Currently averaging a 20% increase in lending to British business for each of the past three years.
·         Plans to maintain its expansion in lending to small and mid-sized companies.

RBS Group

·         Says Funding for Lending has led to interest rate cuts of up to 1.7% on loans to small businesses and the removal of arrangement fees, saving customers an average of £4,500 on the cost of a loan.
·         Core business net lending of £160m between July and September. Gross new lending increased 3% for Q3 compared with Q2.
·         Invoice and asset financing of £117m, which is not included in Bank of England figures.
·         A further £800m has been offered to small businesses and is waiting to be drawn down by customers. Claims it is “on track to deliver the full £2.5bn of SME FLS funding by February 2013”.
·         Gross new lending to small and mid-sized companies in the first nine months of £28.6bn.

Barclays

·         Lending to all businesses rose in Q3 from £28.1bn to £28.5bn or 1%.
·         Over the past year lending is four percentage points above the industry average, the bank claims.
·         However, the bank argues that “demand for lending amongst businesses remains well below pre-recession levels with applications decreasing by 25% over the last year”.

Lloyds Banking Group

·         Having drawn £1bn so far, the bank plans to draw down an additional £2bn by the end of 2012.
·         Plans to maintain 4% net lending growth to small and mid-sized businesses.
·         Funding for Lending has enabled the group to provide a 1% discount on interest rates offered to businesses.
·         Was the first bank to draw down funding under the scheme and can draw a total of £20bn by the end of 2013.
·         Lent more than £10bn to small and mid-sized companies in the first nine months of 2012, amounting to net lending growth of 4%. 

Bearing this in mind, I am going to wait a bit longer before I start saying “I told you so!” but I am watching closely!!

Written by Keith Powell, Business Advisor at Colbea. 



Thursday 10 January 2013

One size doesn't fit all


Sad to say, I’m old enough to remember when there was a bit of a craze on women’s clothes that bore the label, “one size fits all”.  Of course, it never did!  Human beings tend to come in all shapes and sizes and being fairly small myself, the “one size fits all” garment looked as if I was wearing a wigwam. 

“Now why is she wittering on about old clothes?”, you’re wondering.  It was Trevor Edwards, Colbea’s trainer and speaker at the next BIG Group Meeting, that made me think of it.  No, he wasn’t wearing a particularly ill-fitting shirt at the time (in fact, he was his normal smart-suited self) but he was talking about how we should treat our customers if we want to make sure our offering is a good fit with their needs and expectations.

Technology has driven a sea change in terms of the level of service businesses are able to provide to their customers.  The collection and analysis of data means we can look at people as individuals rather than ‘en masse’.  If we use that information well, we soon understand that different customers want different things from us.  The pendulum of business has swung from simply supplying goods or services to developing relationships that will facilitate buying behaviour. 

All buying is, in fact, a solution to a problem.  That problem could be a need or a desire and could range in complexity from very simple behaviour (I’ve run out of milk, therefore I buy a pint a milk) to a major decision making process such as buying a house.  Buying helps us to solve a problem or achieve a goal.  Even buying the same product will have different meaning for different buyers.  For example, the middle-aged man who buys a Ford Focus wants an economical family car that’s reliable and has plenty of space – it fulfils his need.  The same car bought by an 18 year old who’s just passed his test may be much more of an aspirational purchase.

Trevor’s going to tackle the subject of customer behaviour in more depth at the BIG Group Meeting on 15 January.  He’ll be looking at communication, buying behaviour, what happens when things go wrong and what you can do to put things right.  You’ll be taught ways of understanding your customer and of designing communications that help you overcome issues and strengthen relationships.

If you’re not already a member of BIG Group, contact Liz Bourne for more information liz.bourne@colbea.co.uk