Finance and Accountancy Briefing

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To lend or not to lend? A dilemma for the banks


I am sure that you are as aware as I am that banks have withdrawn from serious lending to commercial businesses. Whatever the government has done to try and encourage them to start working for the country again has currently failed. My personal and jaundiced view of this is that it won’t come back for quite some time. We at Goldsmiths receive regular enquiries from accountancy practices asking for assistance with clients who need finance. A couple of years ago we would have had banks queuing up to lend. Now, even if they are willing to lend, it takes forever for decisions to be made, and even when offers have been made they can still be withdrawn or altered prior to completion. I am sure I don’t need to go on about how we all feel about this, and how much damage our banking systems has done to the commercial world and private individuals.

Nevertheless, this is where we are and reality has to be faced. We still have, in the country, high net worth individuals, and also companies and businesses which are cash rich. Well run businesses, well managed portfolios that have survived the problems and are now sitting on assets that earn them very little from investment. Clearly the stock market has done rather well recently, and this has helped some private investors. However, the low rates of return on cash invested has meant there is little value in placing funds with the banks, building societies and other institutions. This does mean that we are receiving enquiries now from investors to seek commercial opportunities. I have every belief that the way the country is going to turn round is not going to come from assistance from the government and their “quantitative easing”. It will come from private individuals getting back to work and making their money work for them. Not only will it work for them, but it will work for the borrowers who won’t have to suffer the same problems with the banks that offer the umbrellas when the sun is shining but the minute it starts raining take it away. Private investors, whether corporate or individual, I believe are going to have a major opportunity over the next year or two to invest in quality businesses who need support, and are seeking growth or assistance, and to keep their businesses on an even keel. The Goldsmiths Group believe that now is the time for industry to support itself.

Please download now for a more in-depth look at Goldsmiths paper.

Tags: Credit Crunch, Bank loans, Investment, Capital Investment.

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