“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.
Important Notice: This document is for general informational purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security, currency, investment, service or to attract any funds or deposits. The opinions expressed in this article accurately reflect the views of Alderwood Capital LLP at the date hereof and, whilst those opinions are honestly held, they are not guarantees of future results, events and outcomes, should not be relied upon and may be subject to change without notice. Although information in this document has been obtained from sources believed to be reliable, Alderwood Capital LLP does not guarantee its accuracy or completeness and accepts no liability for any direct or consequential losses arising from its use. Opinions expressed herein may differ from the opinions expressed by others, and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions. There can be no assurance that an investment strategy or approach will be successful. Historic market trends and behaviours are not a reliable indicator of future market behaviour or performance, nor can they be used to reliably infer the future performance of any investment strategy or approach.
All content within this document is the intellectual property of Alderwood Capital LLP and is subject to copyright with all rights reserved. It may not be copied, shared, sold, licensed, posted, reproduced or changed without Alderwood Capital LLP’s permission. Alderwood is a trade mark of Alderwood Partners LLP and copyright © 2021 of Alderwood Capital LLP.
Alderwood Capital LLP is authorised and regulated by the Financial Conduct Authority of the United Kingdom (Firm Reference Number: 932036). It is not regulated by any regulatory authority in any other jurisdiction.
© 2021 Alderwood Capital LLP.