Umbrellas in the rain

“A banker is a fellow who lends his umbrella when the sun is shining and wants it back the minute it begins to rain.”

Mark Twain

In the last few weeks, I have come across several people trying to start up new businesses here in the UK. Starting a business is a bold step at the best of times but against the backdrop of the global pandemic and the economic devastation caused by the lockdown, the risks are greater; the rewards less certain. These are brave, determined souls who deserve encouragement and support from government, regulators and all parts of the business community.

Unfortunately, a consistent theme is that they are all finding it very difficult to get a business bank account open. In one recent case, I was told that it took more than five attempts, each one involving multiple phone calls and online form filling and document uploads, only to be met with comments like “we need to speak to you first, our first appointment is in December” or “we aren’t opening new accounts now, come back to us when you’re turning over £1m+”.

In ordinary circumstances, I might have given them less credence and assumed that perhaps their circumstances were less straightforward than they claimed, but when I started Alderwood Capital earlier this year, we were turned down by 2 of the 3 banks I had a relationship with – one of them going back 25 years. I’m a former bank vice-chairman, a former director and chairman of multiple public and regulated companies and have an impeccable credit history and strong personal balance sheet. If it’s hard for me, how hard is it for young entrepreneurs or recently redundant staff trying get back on their feet?

Opening a business bank account is a utility function which is essential and vital for the proper functioning of any business. The reasons for the problems seem to be a combination of increased regulatory pressure over take-on processes, the weight of work caused by processing ‘Bounce-back’ and other government schemes, and the fear of fraud related to new businesses setting up simply to exploit the current crisis. All of these are valid concerns and with the weight of responsibility placed on banks and their senior management under SMCR, some caution is understandable, but if we are to avoid an even worse recession and to provide a ray of hope for those willing to take the plunge and ‘build back better’ the banks – and the regulators – need to play their part. The banks, in particular, were big beneficiaries of taxpayer support in the 2008 financial crisis and are still regarded negatively as a result, it would be an own goal of epic proportions if they failed to take the opportunity to be a force for good in this current crisis.