Philip King, chief executive of the ICM, said the agreement reached by Britain’s largest banks to new lending reforms will serve merely to hide a much bigger problem.
He believes that a bigger problem for small and medium-sized enterprises (SMEs) is that they are not as good at producing credit business plans to back their requests for funding.
He said: “I have seen several examples where a bank’s refusal to lend appears to lack logic, and they have made unreasonable and unacceptable demands of their customers.”
“But I have also seen small businesses that are clearly in terminal decline, blaming the banks for their woes when it’s obvious that lending more money would only have delayed the inevitable insolvency.”
King agreed that the banks’ record of supporting businesses is not as good as it is claimed to be, and getting the top level thinking down to local management is similarly not as effective as it might be.
He added: “But a bigger problem is that SMEs are not as good at producing credible business plans to support requests for funding as they should be, nor as good at collecting cash due to their businesses as they need to be.
“It’s about the basic principles of good credit management – you don’t lend more than a customer can afford to repay and you drive profitable sales while protecting your business against unnecessary and avoidable risk.”