Home » Accounting Articles » Finance Experts Say "Banks Will Not Lend" Despite New Government Scheme as Liverpool is Placed on Recession Red Alert
Finance Experts Say "Banks Will Not Lend" Despite New Government Scheme as Liverpool is Placed on Recession Red Alert
Liverpool finance expert says local firms should not put too much faith in new government assistance scheme
LIVERPOOL, UK, January 30, 2009 /Accounting PR News/ -- A senior Liverpool finance expert believes that the newest government scheme to assist businesses during the recession will be ineffective for local firms, despite the fact that the City has today been placed on "Red Alert" as potentially being worst affected during the credit crunch.
The latest Enterprise Finance Guarantee Scheme (EFG), securing up to 1.3bn of additional bank loans to small firms, has been launched by the Government as part of a suite of measures designed to help small business access bank funding during the current economic uncertainty.
The EFG Scheme is open to businesses with an annual turnover of up to 25m, seeking loans of 1,000 to 1m, repayable over a period of 10 years.
However, Liverpool based accountants Wilson Henry LLP, are not convinced that the participating banks will be that lenient when it comes to choosing who will qualify for this financial support.
Peter Alcock, Head of Corporate Finance at Wilson Henry, believes that banks have often been lukewarm in promoting these schemes as they tend to view them as honey pots for poorly performing businesses, which are by definition, unable to obtain lending on conventional terms. He says,
"The Small Firms Loan Guarantee Scheme has been in place for over 20 years whereby the government underwrites 75% of a bank loan. This means the bank is only exposed to a quarter of the loan should things go wrong. It remains to be seen how participating banks will adopt these new measures. It is unlikely they will be automatically applied in all new and existing lending situations and whether the cost of doing so will be palatable. Banks will argue that the basics of good banking are not being rewritten, all lending decisions should stack up on their own merits and a government guarantee does not make a poor lending decision a good one".
With the British economy severely impacted by the global recession, Alcock believes banks will not lend to businesses who are feeling the full impact of the downturn. He concludes,
"Banks are much more comfortable lending where there is a fixable working capital problem. They are far less happy lending to a business where there is month on month decline in turnover and bank loan and interest payments are not being met. A Bank will look very closely as to what steps management is taking to stop cash haemorrhaging out of the business before committing to a loan, irrespective of these new proposals".
Contact
Peter Alcock, Director, Wilson Henry LLP
145 Edge Lane, Liverpool, L7 2PF
Tel: 0151 264 8888
Email: peter.alcock@wilsonhenry.co.uk
Web: http://www.wilsonhenry.co.uk
About Wilson Henry
Wilson Henry LLP has over 50 years' experience and a 30-strong team of qualified staff based at their Liverpool head office. They currently provide chartered accountancy services and business advice to over 500 clients in and around the North West.
Photographs can be requested via peter.alcock@wilsonhenry.co.uk
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Press Release Contact Information:
Peter Alcock
Wilson Henry LLP
Director
145 Edge Lane
Liverpool, Merseyside
United Kingdom L7 2PF
Voice: 0151 264 8888
Fax: 0151 264 6267
Website: Visit Our Website |
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