GDP PLUGGING THE FUNDING GAP

Only when Bank’s begin to meaningfully engage with small and medium sized businesses (SME) will the UK and Ireland return to a normalised and sustained growth economy. SME’s are the engine room of all economies and perform much better than large companies when it comes to net job creation and technical and business innovation. It is Bank’s which are supposed to provide these SME’s with credit allowing them to grow and do what they do best; create jobs and wealth.

Currently the relationship between Bank’s and SME’s is broken and needs to be mended. This broken relationship has been detailed extensively in the press in past number of years and more recently through the Tomlinson Report and the SWAP miss selling debacle.   Many viable businesses have been put in a very precarious position by their banks of late, for one reason – so the bank could make more money – this is not anecdotal as the banks have paid out billions in fines over past five years and it would appear unfortunately this trend is continuing.

The latest Bank of England figures show that all lending to businesses fell by £4.3bn between September and November 2013. Business lending in 2012 fell by £1.5bn a month on average, in 2013 it fell by £1.1bn a month. A spokesman for the Bank of England also announced that many businesses now prefer to raise money by themselves, rather than taking a loan from a bank – I wonder why this trend is developing.

At GDP we can confirm this as we receive numerous request every week to assist SME’s to raise finance and in the majority of cases our only option is to look for finance outside Banking systems be it through Investment Funds or Private Individuals who are looking a greater return than the small returns being offered by banks. To date GDP has sourced finance for businesses which are performing, profitable and growing. These businesses and their needs were not even entertained by the banks. The banks have been proven wrong as these businesses are now growing, creating jobs and contributing to the economy.  What does this tell us – for me it tells us that one of the main challenges facing our economy in the next five to ten years is access to finance.  It is an area in our business model that we have worked very hard in terms of introducing a solution.  Thankfully we now have a range of investors who are interested in providing funding to SME’s and other opportunities.

This alternative source of funding sourced from non-traditional sources are filling the gap in the economy and allowing some businesses to succeed and thrive. However, alternative lenders ultimately do not have the lending fire power of Banks to stimulate an economy.  We need our banks working again and lending to SME’s and the wider economy if we are to have any sustained form of economic recovery.

At GDP we will continue to assist where we can regarding sourcing and providing funding solutions, but we do need our banks to step up to the plate sooner rather than later.

Louis Waters ACA – Senior Relationship Manager