Andrew Ewing: Borrowing still separating businesses and banks

The news underlines the need for a better understanding of the capital position of the major banks, and raises the question of whether they can meet the increased demand for debt.

Many businesses have spent the last three years concentrating on retaining cash but as confidence returns, they will increasingly require the support of banks to assist with funding growth.

The Commons public accounts committee reported recently that the Treasury have failed in their duty to ensure a level of lending is met and stated that supply of credit by the state-owned banks, Lloyds TSB and RBS, appears to have reduced.

There is a view that banks are still too restrictive in their lending criteria but in fact, demand for debt is at all-time low. So what happens when this demand increases?

What business owners mustn't forget is that banks, like other commercial entities, must protect the risks that they are exposed to.

In the past, the risk model was more relaxed, some of which contributed to the economic crisis, and therefore it is only natural that this risk model has been tightened up.

Many of the banks are still holding on to major property assets in the hope that valuations will jump to allow sales to happen, but meantime there is simply limited capital to work from. As the UK has technically exited recession, more could be done to encourage the realisation of major assets to allow more money to be pumped into the system in support of growing businesses.

For businesses, they will have to continue to work harder to secure the facilities they require and the delivery of quality, robust information, systems and processes are vital.

With the lack of trust now in play between some businesses and their banks, we have a long way to go to rebuild effective and happy commercial relationships across the board.

• Andrew Ewing is a corporate finance partner with Johnston Carmichael.