Smaller firms want to feel the width

As we emerge from recession, two banking leaders explain that it’s the scope of support that’s crucial to the relationship with smaller enterprises.

“We’re approving 5,000 loans a week”
As you’d expect in a downturn, businesses are simply borrowing less–term loan applications received by NatWest and RBS last year were down 23% by value. And customers are paying back faster – term loan repayments were up 53% on 2008 levels.

All the same, reports Peter Ibbetson, Chairman, Small Business, NatWest and RBS, “we’re currently approving 85% of all business applications for credit – that’s new loans to over 5,000 businesses a week – and we’re always looking to improve on that figure”.

And they’ve launched a number of initiatives to stimulate demand. “We’re the only bank offering a combination of a committed overdraft and a price promise to our 1.1m small business customers,” he says. “Nine out of 10 small businesses have had their overdraft facilities renewed at the same or lower margin.”

His bank’s Business Hotline aims to make business support transparent and innovative. “Hotline ensures UK businesses – whether existing customers or not – get a fair hearing for their lending proposals, and easy, free access to advice from our most experienced managers.”

And it’s proving a useful recruiter. “To date, 39% of Hotline loans and overdrafts have been provided to businesses who’ve come to us from our competitors,” Ibbetson explains. “We’ve also pledged to make £1bn of new loans available to UK manufacturers on competitive, flexible terms. We believe these fixed rate deals are the best currently on the market.

“And our SME Customer Charter includes commitments not to increase the margins on overdrafts, a cap on arrangements fees at 1.5% per annum on loans and overdrafts, and two years free banking for start ups. As a result 94% customers have had their overdraft renewed at the same margin or lower.”

“Businesses want insightful banking”
Having faced unprecedented challenges over the past two years, the time is now ripe for smaller firms to assess new growth opportunities as we move out of recession, says Donald Kerr, Bank of Scotland’s Commercial Banking Director.

“And, even if investing might not be a top priority at the moment, smaller enterprises should be aware that their competitors may have become leaner and more efficient, and are looking to expand into new territories. Firms are often unsure how to make the most of potential growth opportunities.”

Recent research by his bank, for instance, shows that only one in three SMEs have caught on to the potential benefits of global export markets – although more than eight in 10 existing exporters see overseas sales as a growth generator this year.

And, alongside traditional loans and overdrafts, they’ve seen a “real appetite” for access to European Investment Bank (EIB) loans and Enterprise Finance Guarantee (EFG) loans.

“But businesses are really looking for insightful relationship banking, funding that’s tailored to help them achieve their goals,” says Kerr. “What’s crucial is the quality of the banking relationship. Often, it can be as simple as helping with the paperwork. For many others, it’s the additional services and advice that add real value – guidance with a detailed business plan, or providing authoritative insight and commentary on a specific market sector.”

The Bank’s 2012 SME Charter is a three-year programme to support small businesses with a commitment to clear pricing, access to finance and encouragement for enterprise. It aims to help 300,000 new startups and hold 200 nationwide seminars every year for the next three years providing expert guidance and support on starting up, employment, exporting, bidding for London 2012 contracts, sustainability and finance.