A new bank aiming to offer a lifeline to small businesses has been welcomed by UK firms, but commentators have claimed more need to be done.
Shawbrook Bank launched this week with a promise to lend £250m each year to small businesses.
The bank is a subsidiary of RBS Equity Finance and says it will offer competitive rates, give a definitive answer to customers within 24 hours and will be accessible to businesses even if they don’t hold an account with it.
The launch comes as a recent study from the Bank of England predicted lending costs for most SMEs are set to rise, particularly for firms with an annual turnover of below £1m.
But Gordon Skaljak, external spokesperson at credit management service Graydon UK says whether or not the arrival of the bank on the UK banking scene spells good news for SMEs remains to be seen.
“The aim of boosting lending to small firms is admirable, but success will depend on the lending flows achieved and the availability of finance in a fashion timely to support SMEs’ growth needs.
Skaljak says from a purely credit management perspective, however, this is just a case of “another lender arriving on the scene”.
“Credit managers will be looking to this bank, just like any other, to encourage SMEs to make available detailed levels of financial information to credit reference agencies. This could include monthly management accounts, or other information such as that relating to employee numbers, as opposed to relying solely upon statutory returns.”
Jane Bennett, campaign manager at the Forum of Private Business says while the bank represents a new source of finance for small firms and that is a positive development it has to be put into perspective.
She says: “Shawbrook’s model is lending against the value of a property, a form of asset finance rather than a return to the strong relationship banking that we want to be the bedrock of commercial finance in the UK.
“While a target of lending £250m per year is not huge, the funding that will be available via the new bank should not be dismissed out of hand. However, there is a great deal of work still to be done to improve competition in order address the over-centralised, tick-box nature of today’s banking system, and to restore local decision making powers to branch managers who truly know the businesses in their areas.”
Bennett says providing better relationship banking is how to ease the punitive risk criteria we have seen in recent years, and subsequently bring down lending costs.
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