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Yesterday's Budget failed to address the needs of many struggling businesses
still desperately short of liquidity, claims TMA (UK).
Firms in desperate need of cash may initially be cheered by the news that RBS
and Lloyds have been set a target of 94 billion in new business loans, with
nearly half of it earmarked for SMEs, over the next year.
But TMA (UK) Director Tyrone Courtman claims the move is a red herring and in
practice is unlikely to make it any easier for businesses in trouble to get the
cash they need.
He explained: "For many businesses these new lending targets will make no
difference to their ability to secure a badly-needed loan.
"The banks will only continue to lend to businesses they judge to be
creditworthy, and their perception of creditworthiness will continue to make it
difficult to gain their support.
"As a consequence many more businesses will go to the wall."
"The difficulty for the banks, particularly those in public ownership, is that
they'll be damned if they lend recklessly to businesses with poor propositions
because it's largely taxpayer's money that is at stake, and they'll be damned
by the Government if they don't, because no government wants to face up to the
social consequences of a tide of business failures and subsequent unemployment
and repossessions."
The banks failed to meet their lending targets last year, and blamed lack of
demand from creditworthy borrowers.
The Chancellor's response has been to abolish net lending targets and replace
them with gross lending targets, which will be easier for the banks to meet
without necessarily increasing the amount of credit they provide.
Mr Darling also announced the introduction of a new credit adjudicator, giving
small businesses the opportunity to appeal against the rejection of loan
applications.
Courtman added: "This sounds good on the surface, but if a business isn't
strong enough to satisfy the bank's assessment then I can't see that
adjudication will make much difference."
Source: Credit
Control Journal
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