Small Business Banking Initatives Deemed Inadequate.
This time last year the British Bankers’ Association saw fit to launch the Business Finance Taskforce in a desperate hope to repair the damage done by the recession to the relationship between small businesses and banks.
A significant percentage – almost a quarter – of small businesses felt that the key to developing a good relationship is to offer more choice and flexibility. These sentiments were later echoed by Alex Jackman, the Senior Policy Adviser to the BCA, when he claimed that ‘much more needs to be done to get cost-effective finance to the businesses that need it most.’
What small businesses need is a discretionary system that allows them to deal directly with their local bank manager. This would ensure that small businesses can negotiate terms that are suitable for their current situation and banks can provide those terms in a way that benefits them.
Currently, banks erroneously take a one-size-fits-all approach to lending, with credit approved from centralised headquarters. Of course, the numbers can to some extent quantify risk, but often small businesses do not get the opportunity they need because of inaccurately assessed risk.
The only real way to improve relations between small businesses and banks is to personalise the banking experience so that small businesses feel more involved in the entire process. Without the involvement of regional bank managers, you lose the visceral element to decisions that can sometimes pay dividends. Rather, banks prefer to err on the side of caution with a regressive and cautious system of banking based on inaccurate risk assessments.
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