Business owners are warned to be alert to a ‘cull’ in lending as banks withdraw funding from those businesses that they consider risky. 

Alison Henshilwood, corporate manager at Menzies Active Finance (MAF), says that troubled economic times and an unprecedented lack of confidence towards the banking system are creating an extremely nervous, risk-averse lending climate amongst the banks.

She explains that this is a natural course of events, to be anticipated under these circumstances, but adds that it does pose tough challenges for businesses. 

“After all, the majority of SME businesses are funded in some way. Many banks are therefore reviewing existing clients and, in some instances, withdrawing existing facilities such as overdrafts and loans,” Henshilwood warns.

With often little notice, this is putting those businesses affected under immense pressure as they seek replacement funding. In worst cases, it is giving businesses little option but to shut down.

MAF is urging business owners to review their financial ‘housekeeping’ and, if any doubt as to their standing and position with existing lenders, to seek independent advice sooner rather than later as to funding alternatives.

Henshilwood says that sectors such as recruitment, property and retail are more at risk than others of having banks withdraw funding.

“The good news is that, providing balance sheets are up to date and sound, and financial housekeeping is in order, there are other funding options,” she concludes.

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