The Banks Are Not Always The Villains Of The Piece

I met a man waiting for a train a couple of days ago. I’d seen him before – same place, same time - and somehow we fell to talking about the rise in company insolvency all the way from Lille to London.

My companion was adamant in blaming the banks – and, of course, the record drop in lending - for all of the problems that are besetting business today and driving so many companies into liquidation.

I have to say that I agreed with him in many essentials; it is very difficult to get finance and - at rates often well above Bank of England base rate - it is far too expensive for many large companies (let alone SMEs!) to accept financing at such rates even when it’s offered.

However, the fact is that there is more than one reason for finding oneself short of cash, and it isn’t always down to the fact that one can’t borrow it cheaply, or at all.

I tend to use the long journey from Chinon to London to play catch-up with trade papers and journals that I've not had time to read properly. I'd been playing catch-up that morning with the November issue of the Journal of the Institute of Credit Management and - along with various other things - I'd found a very small article on page 13 written by David Squibb, the Regional Trade Director for Lloyds TSB Corporate Markets.

In his article Mr Squibb related a story about a business with a £30 million turnover that had approached his bank with an unprecedented request to borrow moneys in order to pay its staff. The bank naturally made enquiries, and discovered that the company’s credit controller had gone on maternity leave, and that no steps had been taken to replace her. There was therefore no-one on hand to follow up on invoicing or collecting - and so the cash dried up.

I found the article, and passed the journal over to my sometimes fellow traveller.

The good news is that he’s probably still thinking about it. The bad news is that he managed to disappear into the bowels of St. Pancreas with my copy of ‘Credit Management’.

If you want a free sample copy of Credit Management, you can e-mail Meg Cox at the ICM, and she will send you one. In the meantime: please remember that it isn't just charity that begins at home...