Do you remember Project Merlin?
It was the promise by the big five banks to lend more money to small businesses in order to encourage growth in the economy.
Well, the numbers are now in from the British Bankers' Association (BBA), and they show that the banks have failed to meet their lending targets. But before we throw the baby out with the bathwater, let's look a little deeper.
The banks only missed their target by a sliver - they lent £74.9bn out of a target of £76bn. Not a big failure, assuming the numbers have been added up right!
The BBA claims that the shortfall is due to too few small firms coming forward and asking for credit. There must be some facts to support that, so it's obviously part of the problem. But my feeling is that it's as much about quality as quantity and that there are too few credible businesses coming forward.
These are unusual times. The banks have dug a big hole for themselves and the economy and, as a result, a couple are now owned partly or mainly by us. Whatever they do, it's difficult to find a good word, but our criticism would be even more venomous if their fiscal profligacy continued.
So the banks have to be more diligent in their assessment of new business propositions, not less so.
Until a couple of years ago, many so-called "business managers" in banks were untrained, inexperienced and not much more than glorified salespeople.
But most of the banks have tried to significantly up their game, training their business teams to be more business savvy and alive to the needs of their customers. They will need these skills to sift the wheat from the chaff and walk the knife-edge of allocating lending in a way which demonstrably supports small businesses whilst rebuilding their balance sheets - something that we urgently need to bring back confidence and stability.
It's a two way street. The responsibility for hitting next year's lending targets lies as much with prospective business borrowers as it does with the banks. Banks exist to lend money, so we can only hope that a normal service will soon be resumed.
To conclude, businesses seeking facilities should have:
- A well-rounded and credible business plan
- A robust and risk-assessed strategy which allows for multiple business outcomes
- Clear and measurable objectives, including how facilities will be repaid
- Sound business processes and a commitment to apply rigour to good financial management
- Transparency and strong communication skills to build and maintain trust.
If we deliver all these things and the banks won't lend, then that's the time to complain.
For more information on sources of finance and practical financial management, you can read my book "From Vision to Exit - The Entrepreneur's Guide to Building and Selling a Business", available on Amazon and in all good bookshops now.