The message couldn’t be clearer: with the right research and business planning, the right advice and support, this is a good time to turn a business vision into reality.
The due diligence is tougher and the macro-economic climate is still uncertain. The assumptions that business owners once made about their order books and cashflow no longer apply. It is difficult to predict where the next crisis in the Euro will take us all or how a bailout for Spain could impact upon our own economy.
But the money is there at the banks. In the past 12 months, the Royal Bank has helped 11,000 start-up businesses in Scotland. It is the first bank to take up the Bank of England’s Funding for Lending scheme and has loaned £217 million during the first month. It has committed to lending £2.5 billion across the UK for SMEs and its lower interest rates will mean an average saving of £4,000 on a loan.
Ken Barclay is the Royal Bank of Scotland’s (RBS) recently appointed managing director of corporate banking in Scotland and chair of the Scotland board. He started out working for RBS in Paisley 35 years ago and, since then, has occupied a series of roles in corporate banking, including being a key figure in the financing of the cable industry in the UK and Europe. Now based at St Andrews Square in Edinburgh, he is relishing the prospect of rebuilding trust and confidence in the banking sector.
He says: “Looking ahead five years, I don’t want to be saying that we want to achieve a change in the culture. I want to say we’ve done it. We need to recognise that the culture has to shift from being too focused on revenue and profitability and not enough on serving our customers well.
“The old-fashioned idea of coming into the bank to have a conversation with your manager has a lot of credibility. I don’t want to turn the clock back but I do want to see relationship managers who understand the needs of business. We are investing £500m over the next four years to train our bankers so that they are better equipped to help business customers. They will each spend a couple of days inside a business so that they can really understand what goes on, rather than the theory.”
Stephen Hester, chief executive of the Royal Bank, has made it clear he feels his bank can only be successful if it serves its customers well, and that is as true in Scotland as it is anywhere else in the bank’s global presence. How is Barclay going to contribute to those ideals?
“I’ve just taken up this position to ensure that we do that very well in Scotland, and that we liaise with business organisations and with government. We want to be able to spot the opportunities,” he says. “My appointment is part of Stephen Hester’s aim, to assess how businesses view and feel about us so that we have a clear picture of how we can best operate to meet their needs.”
Only a few years ago, RBS was depicted almost as a kind of pariah, surviving only because of tax-payer hand-outs. Make no mistake, the situation has changed drastically. From a position where RBS ran at 153 per cent in the deposit-to-loan ratios, the bank is now back to a roughly equal position. In other words, every pound deposited is loaned out and not more. Yes, the days of easy lending are over but, for businesses, with real prospects, the doors are wide open.
Anna Louise Simpson is a perfect example. The entrepreneur behind Mamatea (www.mamatea.com) changed her banker to RBS when she set up her business and reckons it was one of her best choices.
She says: “I was a mum with a toddler and a new baby three years ago. I’d worked as a corporate lawyer and loved it but it’s not a world that’s very friendly to a mum who wants to spend time with her children. I was drinking a cup of raspberry leaf tea to try and stave off morning sickness when I was pregnant. It tasted like dishwater. I thought ‘there’s a gap in the market here for herbal teas that taste good’.
“It’s been a rollercoaster ride, to be honest. This is an increasingly competitive market but I went into a niche inside it with herbal teas in pregnancy and that gave me an edge. There have been high points and low points. Winning a contract with Tesco after my first year was brilliant. Losing it a year later was awful. What had I done wrong? Was my presentation wrong? Did I make some crucial error?
“I am learning all the time. You need to stay consistent across the downs and the ups. I was blown away by attitudes in California when I went there. There’s a fantastic outlook, especially for women entrepreneurs, a huge enthusiasm for the whole idea. We need to learn a bit of that, bring them over here, listen to what they have to say and increase our ties with people like that through things like Global Scots. You have to know and understand your own business inside out. If you can’t do that, how can you expect anyone else to take you seriously?”
The Royal Bank is also backing Entrepreneurial Spark (www.entre preneurial-spark.com) , the not-for-profit scheme set up to help start-ups get their ideas to market by providing both space and expertise. Barclay stresses that this kind of initiative has a huge amount to offer.
“There is a whole cabaret of young people who want to get on to the entrepreneurial ladder and E-Spark has found a way to do that,” he says. “We are proud to be the only bank that supports them. We’re able to help with advice on the obstacles, the cut-throat business world, and we’re encouraging more people to get involved with E-spark. We certainly want to do more to encourage and mentor these entrepreneurs.”
For Barclay, there is a multitude of ways in which to encourage and develop new business prospects. And, he says, there is no shortage of financial support, as long as businesses can prove their viability.He says: “With young entrepreneurs, lending money isn’t a panacea. We are able to offer much more than that. We can offer practical business advice, including how best to approach a bank when you want to borrow from them.
“We have ongoing dialogue with those entrepreneurs so we can help them to develop a realistic business plan and of course we interact with organisations like the Prince’s Trust, Business Gateway and others. A few years back, banks didn’t really do this kind of thing. Now, we are educating our bankers and giving them the skills to be able to help more. We want them to be more trusted advisors. If we can do that, if we can get it right first time, then we can close that gap between theory and practice. We can ask intelligent questions and then be far better equipped to help those companies deal with problems as they arise.
It is important that, when there is a problem looming, people come and talk to us. We have set up specialist relationship managers who will be able to help, so come and talk to us as early as you can and in that way, you will increase your chances of being restored to a reasonable state of health.”
Ultimately, it is customer trust that makes it all possible. Only if the banks – not just RBS – can win back that lost trust can they hope to contribute to the future flourishing of the economy.
That Barclay cites customer relationships as such a crucial ingredient in the bank’s future recovery is encouraging for business. It’s not everything in the economy that the banks can control or even influence. The shorter order books, the greater emphasis on due diligence, are symptoms of the financial crisis rather than results of it.
It will be no bad thing if businesses have to think more carefully about how they will perform before they go looking for finance to support their endeavours.