The Finance Flow: Banks need to turn on mid-market funding tap

MID-MARKET companies believe the difficult trading environment would be eased considerably if the banks were to re-open the funding taps, Grant Thornton’s latest Finance Flow report concludes.

However, many companies in the sector also believe they are being snubbed by the big banks in favour of leading blue chips with stronger credit ratings.

All this week, TheBusinessDesk.com, in association with Grant Thornton, is looking at how the flow of finance is likely to affect the growth plans of the vital mid-market sector.

Of the 200 CEOs and CFOs consulted for the report, 60% said they felt banks were less conservative now than they had been in recent times, however, this had yet to transfer into a return to pre-recession lending patterns.

One CFO is quoted in the report as saying: “They [banks] don’t want to know about mid-market firms. They are more interested in blue chip type companies and have opened the door to them. But for the SME sector they are still conservative.”

To read more about the flow of finance into the mid-market sector download a free copy of Grant Thornton The Finance Flow Supplement

Even among firms which felt the lending climate was changing, most said the banks were moving too slowly.

“They are less conservative, but still aren’t lending enough,” said another respondent. “If you have a few rock-solid clients, from a balance sheet point of view , why expand and lend to others.”

Simon Clewlow, associate director, at Grant Thornton in Birmingham, said: “Banks will say they are lending to most sectors but it depends on who you ask and when. A lot depends on whether banks have had their fingers burned in the past.

“The fact is if a firm has EBITDA of less than £3m then they are going to find it tough to get a bank interested in lending to them. It is much more likely the firm will have to consider asset-based lending.

“Banks have gone back to fundamentals and looked at a business and said to themselves ‘Is there a cash generator here?’ – is what the business has been able to achieve over the last few years enough to justify a loan.”

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