APPENDIX TWO
All case studies are from February 2009.
These represent comments from FSB members who have
had negative or incorrect communications from their banks. For
example, one bank branch staff member did not know about the scheme,
and another bank stating incorrect criteria for the EFG scheme.
Case Study One—lack of knowledge:
To my mind, it is THE most important issue for
small business as it will make the difference for many of us between
surviving the recession and going under. It is also the one that
the government is at its most duplicitous—you have a very
stark contrast between the spin and the reality.
When I put this at a meeting with my relationship
manager at NatWest, who initially knew nothing about the scheme,
along with a business development manager, they made it very clear
that decisions were being made by a credit committee who would
take a very dim view of an application to fund losses caused by
a shortfall in revenue resulting from the recession. They would
be quite happy to fund well-researched growth projects, but even
here, the EFG would only apply if I had insufficient assets, ie
my house, to put up as collateral. (fortunately the family home
is jointly owned with my wife who would not consent to such a
thing.) Further questioning revealed that pressure for "prudence"
in lending to small businesses is coming from HMG itself, in the
way of "informal guidance"—so the idea that the
government, which is the majority shareholder of the RBS parent,
is adopting a hands-off approach is a lie. It is claiming publicly
to be doing one thing and privately moving heaven and earth to
ensure it doesn't happen.
Case Study Two—criteria:
We have been turned down for the EFG loan on
the grounds of our serviceability our bankers (Barclays) explained
that as we are in the construction industry and have to complete
any works we do before we are paid for them we are a high risk.
I thought this was normal in any business for you
to do a job before you got paid.
So what type of business is eligible for the
EFG loans?
Case Study Three—incorrect criteria:
On first visit—11.2.2009—I was told
that only business banking specialist could handle my query and
that none of these specialists were available on that day.
I was phoned at lunchtime on 12.2. by Julia Urch.
Yes, they offered a replacement for the former "Small Business
Loan Guarantee" scheme. She asked how much I wanted and what
it was for. Julia then said they only lend amounts from £25,000
upwards. I questioned this—and said that the loans were
from £1,000 to £1 million. Julia then said that this
was not the same scheme. As HSBC did not require "bail out"
money from the government, they offer their own loan schemes.
Case Study Four—poor knowledge:
In 2008 our turnover was £280K and we made
a net profit of £40K. In January we expanded our sales and
engineering support and considering the economic climate we are
forecasting sales similar to 2008 for this year. We don't have
any loans or credit cards and not even an overdraft facility.
To support this growth we require extra working capital
and approached our bank this week to discuss. We were armed with
last years accounts, company overview and objectives, current
cash flow forecast, three year budget to see us back into profitability.
We are aware of the Small Business Finance Scheme
through information in the press and from FSB and mentioned it
as re requested funding up to £100K (Ideally we want £80K)
over three to four years.
Firstly we were told that the scheme doesn't
really exist and that it is just Government hot air attached to
an old small business help plan which was obviously not available
or suitable for us. The conversation was quickly switched to introducing
us to a some sort of enterprise dept and we were given a telephone
number to call. The impression was given that this call was to
an adviser who could help us secure the loan. It turned out to
be to find an investor service, who wants to evaluate the company
and take equity in return for the investment. This is nothing
to do with the bank.
Having had time to think about the bank meeting
we feel very dissatisfied with the bank and feel we have been
dismissed by them. In short they are doing nothing to help us.
So my question is: Does the EFG scheme really
exist and if so how can we use it?
Case Study Five—lack of urgency:
I run a small deli/restaurant business in my
local area. I am also a member of the FSB. I wonder if you can
give me some advice. I read an article from the West of Scotland
Voice of Business booklet. The article heading was "Are
you finding it easier to obtain Finance? Let us know".
I have not found it easy at all to obtain extra finance
from my business bank. I have a business account with the Bank
of Scotland and have been asking them for an extra £1,000
for the last two months (we already have an overdraft facility
with them which we obtained well before the "credit crunch"
started). My Account manager has informed me that their legal
people are dealing with it as there is no product available yet
to give funding.
According to the article the Enterprise Guarantee
went live in January and has been available to us for over two
months now. What I want to know is why the Bank of Scotland has
no funding available from the £1.3 billion? Is this the case?
Are they not one of the main high street banks?
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