This is my column that will feature in Saturday's Financial Times, which can be found in the entrepreneurship pages of the Money section. You can also find my columns on the FT web site here: http://www.ft.com/mikesouthon
There has been considerable media interest in the take-over of Northern Rock by Virgin Money, with speculation in the small business community as to whether the resulting entity will be the 'entrepreneur's bank' that we so desperately need.
This view seems to be shared by the government. I interviewed Mark Prisk, the Business and Enterprise Minister, at the Conservative Party Conference and asked why the government seemed unable to force banks to lend to small businesses, even those where the taxpayers are shareholders.
Prisk hinted at the Chancellor's then unannounced credit guarantee scheme and was very optimistic about the imminent prospect of several new entrants to the banking market. He expressed the hope that the resulting fierce competition in the high street would force the incumbent banks to smarten up their act.
As my contribution to the debate inside the UK banks, both incumbents and new entrants, here are some suggestions for how they could become the entrepreneur's bank with minimal up-front investment or excessive risk-taking.
The banks should understand that they should not classify small businesses by turnover, but rather by the number of people in the organisation. Following classic networking theory, their entrepreneurial support should focus on businesses from sole traders to 150 people.
Their first step would be to support motivational live events, inspiring and entertaining early stage entrepreneurs. There are dozens of inspirational speakers available and plenty of delivery channels to work through, such as universities and entrepreneur-related trade associations.
Everyone attending should be encouraged to continue their learning by being directed to the free on-line resources now available, such as the newly improved Business Link site.
They should also exit the event with a brand new entrepreneur's bank card. This would initially be a loyalty card, offering heavily discounted offers at places where entrepreneurs are likely to shop, such as stationery, computer and phone stores.
The most important step for any new entrepreneur is to ask someone for some cash for their products or services. Should they be successful in this endeavour, a single visit to a bank branch would convert the loyalty card instantly into a debit card.
I encourage most entrepreneurs to run cash-positive businesses, but those who do need short-term loans should be able to convert their debit card into a low-interest credit card and borrow money as a microloan.
Muhammed Yunus set up Grameen Bank because the mainstream banks in Bangladesh were not lending to the poor in the country. This has inspired the formation of microfinance banks being created in the UK, such as Fair Finance, which is in the process of opening a series of branches across London, with plans to go nationwide.
Once an entrepreneur has shown that they have secured the support and advice from a credible mentor, the debit card would then become a fully functioning credit card from a microloan bank. Mentor-led entrepreneurship has been successfully practiced for over 35 years by The Prince's Trust.
Should entrepreneurs successfully pay off microloans and have started building an effective team featuring a part-time finance director, they should then be able to write a realistic business plan. This would enable them to have a genuine working relationship with a traditional bank, including borrowing money on properly negotiated terms.
Once bank managers have developed a good working relationship with entrepreneurs' finance directors, they should also be encouraged to receive guidance from the entrepreneurs' mentors.
This support would be highly valued, as few bank relationship managers have any first-hand experience of running a small business themselves, the root cause of the disconnection between entrepreneurs and banks in the first place.
