Two of the UK’s best known entrepreneurs and businessmen have entered the fray regarding loans to small businesses and the apparent unwillingness of banks to lend to them.
Gordon Brown has appointed a panel to ensure that banks deal fairly with entrepreneurs. Lord Sugar, the Government’s Enterprise ‘Tsar’, is the most well known and head of the panel. He is accompanied by John Wright, the outgoing chairman of the Federation of Small Businesses and Mike Fairey the former deputy chief executive of Lloyds TSB.
Lord sugar’s appointment has come as a bit of a shock to many given his earlier lambasting of failed loan applicants. He branded them ‘moaners’ and said that banks were, in his experience, doing a thoroughly professional job. So if banks weren’t lending to them it was because the businesses should be talking to an insolvency practitioner, not a lender. He said that many small business owners were living in ‘Disney World’ if they thought the banks and government should write them blank cheques just because they thought they had a good idea.
Philip Hammond, Shadow Chief Secretary to the Treasury said: “Only Labour could announce on April Fool’s day that it had appointed the man who called credit-starved small businesses "moaners" who lived in "Disney World" to be the adjudicator on their applications for bank loans. No wonder no-one believes Lord Mandelson’s claims to be the champion of small business when Labour would rather tax jobs and the recovery than cut government waste.”
Many small business owners will be asking whether Lord Sugar has the right outlook and mentality for the allotted task.
Sur Stelios on the other hand is looking at this problem from the other perspective. He was recently rejected for a mortgage on his Â£5.2 million commercial property so he could raise money for his next project. He eventually had to use his shares in his budget airline easyJet to raise the Â£17.5 million in cash he needed to buy 80 Old Street and convert it into an easyHotel.
Sir Stelios found himself in the ‘Catch 22’ situation of the banks not being willing to loan the money for the project as he needed planning permission, but planning permission could only be granted once he’d bought the property.
This is Sir Stelios’s third property acquisition over the last year. In the past he has shunned physical assets but now believes them so underpriced that he sees them currently as good investments.
Sir Stelios said: “I found it impossible to raise financing, so I had to buy the property with cash. The banks are supposed to be helping small businesses by lending more, but they are only paying lip service to that. The banks have got to become more sensible because they are preventing people like me from creating new jobs.”
How short our memories are. Just a year ago the banks were being castigated for causing this credit crunch because of their lackadaisical lending practices. It was all their fault for being too free and easy with credit went the mantra. Now when the banks go over everything with a fine toothed comb and turn people down we moan they are being too tight.