Banks are 'Slammed' by Government

Two banks, Lloyds Banking Group and the Royal Bank of Scotland, have been condemned by the Government for not lending enough money to small businesses. This is after a promise from them to do so after they were bailed out with public money.

The Public Accounts Committee (PAC) Report states that the "lending commitments are not being met and the Treasury is unable to explain this." The commitments are of £39 Billion promised to be lent to home owners and businesses. Furthermore the commitments are said to be legally binding, yet the Treasury can only do so much to encourage RBS and Lloyds to follow through.

In their defense, the banks say they are offering the money, but not many companies are asking for loans. Stephen Pegge from Lloyds Banking Group said they are even giving to 80% of those who ask. Still, others insist that it is the banks' fault as it is too difficult to get a loan from them.

Since loans have been hard to get, many small businesses have started managing themselves by going directly to their savings or even using costly credit cards to avoid the other obstacles involved in getting loans.

Commenting on this, Stephen Alambritis, from FSB says that the banks are allocation the money but are at the same time making it difficult for business owners by charging extra for the loans. On top of this there are many other fees that need to be paid to get new money such as: audit fees, review fees and facility fees. The federation, he says, is pushing to make the process simpler.

Another thing the federation has already managed to do is allow some smaller businesses to see a financial intermediary when dealing with banks should they want to do so. So rather than seeing someone who is unknown when dealing with the bank for lending, borrowing or charges, they may go through somebody they are familiar with.

Banks are 'Slammed' by Government

Companies Will Go Bust After Recession

Now that we're out of the recession more companies than before are expected to go bust. Insolvency experts have said around 28,000 will go bankrupt in 2010, 5,000 more than last year.

This is a common occurrence after a severe economic decline. In the recessions of the 80's and 90's unemployment peaked 2 years after recovery.

The reason for this happening is firstly because of an increased demand by customers from business owners for which they don't have the capital. The second reason is that loaners who may have lent to struggling owners during the crunch now expect payments quickly and the business owners are unable to pay this straight away.

There had been various help given by the government during this period including more loans and allowing taxes to be paid later. Some small to medium enterprises even had to take overdrafts which according to the British Bankers Association has amounted to £9B. Some want bankers and loaners to now be more flexible about receiving payments.

To prevent ones business becoming insolvent, Louise Brittain, the insolvency specialist at Deloitte, recommends seeking advice from professionals as soon as one feels they may be in difficulty. Speak to your bank and major creditors to make arrangements for cash flow issues and do this early.

Source: Working Lunch, BBC. (27-01-2010)

Companies Will Go Bust After Recession

Text Loaning

A new method for acquiring emergency loans has emerged known as text loaning. These are loans which an individual can receive by just text messaging the companies that give them using a mobile phone.

One company known as Txt Loan offers this service. After a registration and approval procedure a customer can text the company any time of the day for a quick fix of up to £100.

The interest rate can be quite steep, from £10 interest on a £100 loan to be paid back in just a single week; a rate of 994% APR, although being paid back weekly it may never come to so much.

There is a concern over how this may affect peoples' debts, especially in times like Christmas and when most of Txt Loan's customers are in their 20's and 30's. However, Gert Koppel, Chief Executive of Txt Loan says it is value for money and that the rates are clear and easy to understand.

Txt Loan claim to be responsible and only give loans to persons who earn at least £400 a month. They say only around 10% of applicants are ever accepted on the deal and that most pay their loans back on time.

Some organisations, such as Credit Action, are still wary though that other companies might try something similar and irresponsibly target more vulnerable people such as students.

Source: Working Lunch, BBC.

Text Loaning