Lenders must find a happy medium to help SMEs grow
Wednesday, October 31, 2012
I'm sure many of you won't be surprised to read that the majority of SMEs have had their overdraft facilities reduced in the past 12 months.
Equally, it’s hardly surprising that many companies rely on them to stay afloat. After all, in the good times a healthy overdraft facility is the umbrella that comes in handy at the first sign of rain and when most businesses have been weathering a veritable monsoon for a number of years they can very quickly become the only thing that stops them from drowning under the deluge.
While the wholesale reduction of overdraft limits is trying at the best of times, more worrying is the impact it will have on those afflicted companies in Q1 next year, when rent and rates are due and the work has slowed.
The sector’s casualty rates always spike at the start of the year and a worrying number of industry watchers are already predicting a bloodbath in early 2013.
As much as it pains me, I can see the logic of why the banks are reducing overdrafts: their risks are rising so they’re keen to reduce their exposure to them. However, the reductions aren’t the result of a forensic study of individual companies fiscal health, more a universal change of policy that all too often impacts previously solid companies who just happen to be too small – or, worse, just too ‘print’.
Nobody wants to see a return to the days of happy-go-lucky lending that got us into this economic quagmire, but there has to be a happy medium and if the banks can’t find it voluntarily, then the government needs to force them.
Darryl Danielli, Editor, PrintWeek