Securing finance from banks for small businesses remains tough, according to an article in today’s The Daily Telegraph.
Echoing this month’s comment in BikeBiz, the report tackles the tougher lending conditions in place since the recent banking crisis.
York's Cycle Heaven has opened a second shop in the prime location of York train station. Owner Andy Shrimpton, owner of York’s Cycle Heaven, told the paper: “We are an established business for 18 years, profitable every year apart from the one when we did a big extension to the shop. But getting finance was hard."
Shrimpton has hired three full-time staff and one part-timer for the new shop, but Shrimpton said he would have been more ambitious if his bank, HSBC, had not been so cautious about lending him money. While the shop’s local branch has been supportive, head office has required Cycle Heaven to ‘jump through hoops’.
“[the size of the shop staff] might be because the bank gave us so much hassle it makes you more cautious than you would be.”
Last week the Bank of England’s regional agents said small firms “generally perceived credit conditions to be very tight. And many small firms were reluctant to approach banks in case it led to an increase in the cost of existing borrowings, or reductions in overdraft limits.”
Cycle Heaven’s owner added that competition in cycle retail is currently tough: “It’s a very competitive market. We are a classy bike shop and we had a premium strategy. Now we have a hybrid strategy. We talk a lot more about price than we used to and we draw our customers attention to our prices.”
Despite small businesses struggling with finance, credit options for customers are seen to be improving. New finance suppliers have stepped in after well known banking names exited the market, not least Moneyway, through the Ride It Away scheme. Competition is limited in the area, however.
The Actsmart's Mark Walmsley said: "What has historically been half of the retail finance market announced it was exiting. It meant a lot of large retail groups were also looking for finance. We are realistic. They are far more attractive. For us, a bunch of disparate independents that each had to be signed up and assessed individually, was a challenge."
Cycle Heaven's Andy Shrimpton said: “We used to deal with a provider of retail finance that was particularly rubbish, Blackhorse. Their rates were not great and the system was a bit creaky. We now have a system that has better terms, better rates and much better approval rates. It would be good to have more competition but I’m pleased we’ve replaced someone who was a bit conky with someone more focused and doing a good job.”