Jul 03, 2013 Simon Williams
As everyone in the United Kingdom knows, funds have been tight across the board in the last few years years since the start of the Great Recession. This might be best evidenced through the fact that when individuals headed to the high street for a loan, they likely found doors of banks and other traditional financial institutions shut to them unless they had a perfect consumer credit score. This was true regarding private citizens, business owners and many other people between 2008 to 2012.
So during this time, people started getting creative, asking friends and family for cash, turning to credit unions and other organizations. However, many individuals attribute their ability to tread water during this time to short term lenders.
Many of these companies don't take traditional credit scores into account when reviewing applications to borrow. Instead, they use different financial information to paint a more comprehensive picture of someone's creditworthiness.
Now that the economy is picking up, it would seem that leaders within various industries in the U.K. are realizing that the need for more loans across the nation is critical. Many banks are loosening their purse strings and even lending to entire sectors of business. Perhaps this will influence more consumer-based loans in the future. And maybe this latest trend shows that the largest economic organizations in the U.K. took a page out of the books of alternative finance companies.
Leisure industry helped out by loan
According to City A.M., banks NatWest and RBS are trying to jumpstart the leisure industry because so many people haven't invested in trips and other forms of entertainment in the past few years. The two entities are pairing together to give £150 million to a new Leisure Fund, which will then be directed toward businesses that operate within the sector.
While some in the U.K. might find it funny that after years of not helping anyone out with finances, banks are going this route, and this might well be a critical move for the economy as a whole. NatWest and RBS Head of Leisure for Commercial Banking Andrew Taylor explained to City A.M. that the sector garners £97 billion in GDP every year and supports the jobs of 2 million citizens. So if leisure experiences a major drop, a lot of people across the board will be out of a career.
"It is vital for the U.K. economy and needs the right support from banks to grow," Taylor noted, as quoted by the source.
Not extending money to small firms though
However, the increase in generosity by large British banks doesn't extend down to small businesses, it appears. According to the Wall Street Journal, RBS and Lloyds Banking Group in particular are still not opening their doors to small companies, Business Secretary Vince Cable said at a recent alternative finance event. He expressed interest in seeing government-backed banks lend to owners, but he also noted that creditworthiness criteria at these institutions is strict, which is holding them back.
"I certainly ... would like to see those two institutions taking more responsibility for the recovery of the U.K. economy and supporting growth," Cable noted.
The news source said that many British lawmakers have highlighted the lack of lending going to small company leaders. This led to the Bank of England and Treasury lending scheme, which cut costs banks have to meet when extending loans to smaller businesses. This has all but been a failure, many agree.
Luckily for British business owners, they still have the option of going to a short term lender. These companies were there for them when they needed funding during the recession, and that has not changed now.