As an entrepreneur my relationship with banks is rather straightforward: I use them to achieve my business objectives. They, in turn, profit from my success. Therefore I struggle to understand why the government, as majority owner of RBS and Lloyds Banking Group, doesn't use its relationship to greater effect.
Earlier this year I launched a new nursing home group alongside some other investors. We have put up our own capital and cash flow is supported by banking facilities. Despite the fact that the bank in question isn't owned by the government, the facility was easy to arrange even though it was for a new and unproven business venture. Why? Because based on a long-standing relationship and despite challenging economic conditions, the bank is still willing to accept my word as currency.
I am left with an overwhelming feeling that the government is missing a trick. Only a few weeks ago I found myself once again in the negotiating position with banks. I needed a facility which could support the interim stage of a new real estate investment trust I'm creating - one which will provide much needed accommodation for people with special needs. Needless to say, risk management has been a crucial element of the process; a key aspect being the extension of facilities based on the local and central government underwriting part of the risk.
Banks are concerned about risk on two levels; financial and reputational. Perhaps understandably albeit not entirely justifiably, no bank in the country wants to be in a position where it has to evict a disabled person. So it demands deposits and amortisation. As well as reducing risk for the bank, these measures significantly increase costs and limit the potential to develop much needed new homes to meet local authority repatriation plans.
Imagine my surprise when the banks not owned by the government proved far more supportive of this venture than those who, effectively, I as a British citizen have a stake in.
I don't want to criticise banks, or in fact any business, for being risk averse. Any entrepreneur should be able to put forward a solid and sustainable business proposal if they want investment - be that a banking facility or private equity. What surprised me was the difference in culture; the difference in attitude. Is it not odd that an independent bank is more open than a bank owned by us as tax payers to accept a state guarantee (provided locally or by central government) as a means of risk management?
I have spent the best part of December knocking on government's door - asking for their help so that I can help them. I am not asking for money. I am trying to persuade those in power to use Britain's ownership of RBS and Lloyds TSB as goodwill just as I used my existing relationship with my local bank. I want the government to support, not fund, the development which we all want to see.
Banks shouldn't be forced to make poor banking decisions - let alone by government. They should however be encouraged to accept a government guarantee as sufficient currency to lower to the cost of lending. Especially financially sound schemes which are seeking to solve a growing social need.
*No banks were harmed in the preparation of this article.