In fact, complaints from smaller companies to the Financial Ombudsman Service about the availability of loans have more than doubled and now the chief executives of Britain’s six biggest banks have formed a taskforce that will look into the availability of funding for SMEs.
Meanwhile, secretary of state for Business Innovation & Skills Vince Cable has published his Green Paper Financing a Private Sector Recovery, which highlights the vital role that Britain’s 4.8m small businesses play in the UK economy and their importance in securing future economic growth (SMEs are defined as having sales of less than £25m for the purposes of the report, which means that all bar the biggest 100 firms in the printing industry fall into the SME bracket from Cable’s point-of-view).
Change in mindset
How is all this affecting the capital intensive printing industry? Mark Nelson, director at Compass Business Finance, reports that the one consistent thing in the market is inconsistency.
"From our perspective, what we’re seeing is there has been no general rule of thumb for the past 12-18 months. It’s a matter of matching the right company with the right bank or finance house and, more often than not, it’s proving not to be the incumbent bank," he says, noting that "there is no one solution at the moment".
Nelson warns of a mindset change among some banks and makes the point by noting that some banks that once viewed an invoice financing relationship with a customer as a strength, will now see it as a risk. "We are trying to educate customers not to put all their eggs in one basket. If you deal with more than one funding provider then you have a track record with more than one bank and that gives you more options should you need them," he adds.
With banks under fire for not lending and wary of the bad publicity this is generating – in the year to 31 March 2010, 496 businesses became so frustrated they complained to the Financial Ombudsman, 270 more than in the prior period – Nelson also says he has observed what could be described as delaying tactics. "Some major banks won’t say no, but they’ll prevaricate. So it won’t go on a report somewhere as a rejection, but effectively that’s what it is."
Murray Booker, director at broker BPFL, also reports a dearth of new lending. "Banks are telling us they are lending to small business, but the reality is those customers are probably on their books already. I don’t see any new business," he states, while quipping "all roads lead to Sidcup".
Position of power
He’s referring, of course, to Surrey Asset Finance, part of Close Print Finance, which is the single largest lender to the printing industry with some £150m of print assets on its books. Managing director Basil Bannayi confirms that overall turnover in the company’s asset financing business (which also includes construction and equine equipment, among other things) has gone up by 25% in the past 12 months.
"We’re not doing anything different, it’s because other lenders aren’t out there," he says. "We still hold true to our values and we don’t want to lend irresponsibly. We visit customers and want to understand the deals. And we want to make sure the prices are right and the customer has the ability to pay for it. It isn’t just about protecting us, it’s about protecting the customer too. So long as all that fits, we’re happy."
Given this position of power, what advice does Bannayi have to offer print business owners who are frustrated by matters financial?
"Open your eyes to what could be possible," he counsels. "Someone who is an expert can come and talk to you without obligation. We might just be able to show someone that they can update their kit despite the credit crunch."
Bannayi can count Synergie Group managing director Terry Hannam among his satisfied customers, and Hannam even goes so far as saying that, without Close, "the industry wouldn’t be moving and it would implode".
That said, Hannam still believes the banks in general will be supportive to the right sort of businesses, and his track record in acquiring businesses that have failed for one reason or another means he has plenty of experience of picking up the pieces when things have gone wrong: "There are a lot of people crying that they can’t get funding. In the conversations we’ve had, the banks aren’t supporting them and no wonder – they’ve no hope. Talking to our bank manager about funding in general, he said the people he would support and lend to willingly aren’t asking for it, whereas the people who do want it are past helping.
"Overall, I honestly think that if you’ve got decent accounts and can show you are on track, most banks are being supportive. We’ve dealt with Close Asset for years, I’ve never had any problems and we wouldn’t be where we are without them – for example, when we bought White Horse Press, we sorted out a deal in a couple of hours. But, then again, in six years with them I’ve never missed a payment," Hannam adds.
The value of a consistent track record is a common theme that runs through any conversation about banks and lending. Like Synergie, Leicester-based Flexpress used Ipex as a platform for reinvestment, purchasing a five-colour B2 Ryobi press. "We financed it through our own bank, HSBC, and they’ve been very supportive," explains managing director Steve Wenlock. "We’ve also just bought our own premises so we’ve made two hefty investments. To be fair, we’ve had a good relationship with them and we’ve kept our promises. And we’ve been banking with them for 20 years."
However, banks aren’t always so amenable and the vagaries highlighted by Compass’s Nelson can cause understandable frustration: "I spoke to someone recently who wants to refinance in order to restructure their operations and put a new, more efficient press in, but their incumbent bank won’t restructure the debt. They will lend them more money, but that would mean bigger payments," he explains. "The bank hasn’t bought into the rationale and we are finding that marrying the financial position against the rationale is increasingly important – but there’s no consistency on this. For example, if a customer has lost money in 2009, but is making money in the current financial year, a lot of banks are still struggling to see that the business has turned around. In a lot of cases, the automatic reaction is not to support that and there’s a period of stagnation because of it."
Larger firms aren’t immune from the effects either. Take £389m-turnover St Ives, which secured a new, fully committed £70m facility with RBS and HSBC last year. Arranging this facility proved to be a more expensive and time-consuming exercise than on previous occasions, even for a group of the plc’s stature and balance sheet strength.
There are concerns too that the sort of entrepreneurial activity that could create the next St Ives is being stifled. Belfast-based packaging group MSO has acquired a number of companies since the MBO of the business from Baird Group eight years ago. The £46m-turnover group is currently in the midst of a £4m, three-year investment plan that has involved the purchase of an eight-colour B1 press from KBA.
"Asset finance is the route we have gone down for our investment programme and people are still lending, but they are looking more and more at the residuals," says chief executive Dominic Walsh.
"They want greater security and there is more and more scrutiny – it’s harder to borrow. For entrepreneurs trying to grow, banks won’t support their risk or take a punt anymore. In 2004-2005, the bank was prepared to give us a growth facility of £7m without security. Now, if I asked to borrow £7m it would say ‘yes, can you give me £7m security’!"
Government aid
The green paper Financing a private sector recovery poses a number of questions about the future of funding for business, including:
- What steps can banks, industry or government take to strengthen banks’ relationships with their customers and ensure businesses are not discouraged from seeking finance? What steps can the banking sector and others take to improve the financial readiness of business?
- What options should be considered to support increased lending to business (including possible expansion of the Enterprise Finance Guarantee (EFG) scheme or payments to part of the supply chain)? How effective is the EFG in increasing access to debt finance for small business? What could be done to improve it?
- What more could be done to promote greater competition in the provision of business finance? What other actions could be taken to help businesses (of all sizes) access a wider range of different finance options?
To read the full report visit: www.bis.gov.uk/businessfinance
The consultation period closes on 20 September
FINANCE LEAGUE TABLE | |||
| Company | Years trading | Contact | Services and specialisms |
| Barclays Asset & Sales Finance | 70+ | n/s | Factoring/invoice discounting, finance lease, HP, operating lease, sale and leaseback, asset-based lending |
| BPIF McInnes Corporate | 3 | Marcus Clifford | M&A, corporate finance |
| CFC | 16 | Jon Dale | HP, finance lease, operating lease, loan and chattel mortgage for debt restructuring, equity release, capital investments |
| Close Print Finance | 24 | David Bunker | HP, finance lease, operating lease, loan and chattel mortgage for debt restructuring, equity release, capital investments |
| Compass Business Finance | 5 | Mark Nelson | Asset purchasing, capital release, debt restructuring, MBOs/MBIs, M&A, invoice finance |
| Credit Agricole Commercial Finance* | 20+ | Jeff Longhurst | Asset-based lending, factoring/invoice discounting, supplier finance |
| Hitachi Capital | 28+ | Steve Smith | Contract purchase, factoring/invoice discounting, finance lease, HP, invoice discounting, operating lease, loan purchase, sale and leaseback |
| HSBC Equipment Finance | 78 | Simon France | Finance lease, operating lease, HP, sale and leaseback, commercial loans |
| ING Lease | 21 | Chris Stamper | HP and finance lease through finance brokers |
| Lloyds TSB Commerical Finance | 40+ | Ian Byers | Asset-based lending, finance lease, operating lease, HP, sale and leaseback |
| Print Equipment Finance | 8 | Ciaran Tucker | Finance lease, operating lease, HP, refinance, sale and leaseback, VAT loans |
| Print Finance | 18 | Paul Coggins | HP, leasing, VAT loans, refinance |
| Royal Bank of Scotland | 283 | n/s | Provides a wide range of different finance options |
| SGEF (Société générale) | 13 | Giles Turner | HP, finance lease and operating lease. Has a tie-in with Heidelberg Europe |
| State Securities | 30 | n/s | Asset finance and refinance, commercial mortgages, factoring, small firms loan guarantee, turnaround finance to UK SMEs |
| Surrey Asset Finance | 20 | Basil Bannayi | HP, finance lease, loan and chattel mortgage for debt restructuring, equity release, capital investments |
