“The only time the banks have ever loaned me money is when I’ve proved beyond any shadow of a doubt that I don’t need it.” That’s Richard Cohen, the founder of digital music media group LoveLive, although it could be almost any entrepreneur I’ve spoken to.
The banks may say they’re raring to lend, but when talking to someone who has started their own business, the conversation invariably turns to just how little help they’re getting from the industry.
It’s all about cashflow for start-ups — making sure you have enough in your account to keep going and to try to prove your idea is a winner. Yet the feeling is the banks are just too reticent to help out.
One occasion that particularly sticks in the throat for Cohen — who, bear in mind, started LoveLive not as a rookie but as a former senior executive at sports rights firm Perform Group with serious backing — was when Barclays refused to give him funding to film a six-part reality series following pop outfit McFly, even though he had a signed contract from Channel 5.
Hoping things are on the turn? Afraid not. PwC is today warning that a shortfall in bank funding for small and medium-sized firms across Europe will be with us for at least five years.
In fact, the accountancy giant reckons things are actually going to get worse — that firms will “find the terms of bank credit, already demanding, virtually unaffordable”. Fantastic.
There are a growing number of alternatives. Peer-to-peer lending; angel investment networks; crowd-funding — all good, innovative options even if there’s hardly a flood of cash yet ready to be soaked up.
One perhaps surprising option for small firms is Borro — essentially a pawnbroker for high-end goods, although founder Paul Aitken doesn’t believe the comparison is fair. Borro specialises in lending against luxury assets; think exotic cars and Cartier watches rather than cheap gold rings and used game consoles. Need some cash and got an Oscar statue or a Banksy lying around? Borro is the place to go.
On first glance it sounds a great service for aristocrats who have fallen on hard times but still have the family silver. In fact, Aitken says about half of the loans are to the self-employed or to owners of small and medium-sized firms.
With loans averaging out at between £7000 and £8000, Borro is unlikely to be funding huge expansion drives. But it is clearly fulfilling a service that the banks aren’t — even if only for those who have a fine wine collection going spare.
Instead of a drop-off in bank lending, Aitken believes they were never really lending to small businesses because the demand wasn’t there as much among the older generations.
“There’s a lot of small business owners who are debt averse, particularly people who are in their fifties and sixties who have a certain attitude to credit, which maybe the younger generations don’t have,” he says.
Perhaps that’s true — but there is an appetite for funding now. Businesses are being forced into increasingly complicated contortions in order to get what they need. People who should be focused on growing their business are having to work out how to scrabble bits of cash from all over the place just to keep going.
It’s not just in the long-term interest of banks to help businesses, and therefore the economy, to grow — they have a responsibility too. Just because others are trying to fill the void, that doesn’t mean the banks can stand idly by.
It’s good to see the return of Diamond
Bob’s back. The man whose swollen pay packet for many typified the worst excesses of the banking industry has largely kept his head down since resigning in the summer of 2012.
But Bob Diamond’s renewed assault on the City has been gradually gaining momentum since his African bank venture Atlas Mara was unveiled last year. This week, Diamond started getting the band back together, hiring Barclays’ Middle East and North African chief John Vitalo as his new chief executive, while he has also just signed deals for banks in Botswana and Rwanda.
It’s a breath of fresh air to have him back in the news — the wry half-smile, the glasses, the surname perfect for headline writers.
His return highlights the fact that the current crop of bank bosses are just a bit, well, dull. That’s probably a good thing — you can’t blame Diamond’s successor Antony Jenkins or Ross McEwan at Royal Bank of Scotland for portraying themselves as a safe (i.e. boring) pair of hands as it’s what the public and politicians want, and what the industry’s battered reputation needs.
But that doesn’t stop me having a guilty feeling of pleasure at Bob’s return. The thing that would top off his comeback? A reunion with former right-hand man — and the only banker with a better name — Rich Ricci. Go on, Bob, you know it makes sense.
Read the article at Evening Standard