Businesses, banks and borrowing

By Simon Willis Newsnight Scotland

Lisa Malone was not surprised to be turned down for a loan

Have the banks stopped lending to business? Ask a banker and the reply will probably be "no". Ask just about anyone else in business and you might hear a different story.

Because, while banks may be lending, some businesses that in the past could have expected to receive a loan are finding it much harder to borrow.

Since last summer I've been following four new businesses, set up in the Scottish Highlands in the worst economic conditions in decades.

We call the occasional series "Born In A Storm", and what a storm it's turning out to be.

I rang our four entrepreneurs to learn whether any of them had tried to borrow.

It transpired two of the four had recently asked their banks for financial help, one for a loan, the other for an overdraft. Both were refused.

Lisa Malone runs the Equus Riding School in Moray and had heard the rumours, so she was not surprised to be turned down.

'Rock solid'

Her business is less than a year old and, even though her turnover is three-times her business plan predictions, the bank would not lend her �80,000 on top of an existing �90,000 loan.

Put like that, perhaps the decision was understandable.

Yet the money was to build an indoor riding centre, unaffected by winter weather, so she can fulfil the demand Lisa is convinced is out there.

She argues her projections are rock solid.

Clearly, the bank did not agree. Is the credit crunch to blame?

Obviously, Lisa can't prove that in the past she would have been given the loan, but it makes her question whether, for the banks, this is business as usual.

So I asked an accountant and he could not have been clearer.

"It is absolutely not business as normal", explained Paul Capewell of the A9 Partnership (Highland).

Paul Capewell said it was not business as usual for lenders

Banks normally use assets like land and buildings as security on a loan but currently those assets are falling in value.

Which, according to Paul, means "the banks are not in a position to maintain their normal levels of lending".

The second of our Born In a Storm businesses, which tried to borrow, is an industrial and specialist engraver called Keatek.

Derek Grier recently moved out of his garden shed in Morar and into a factory unit near Oban.

He also found himself in choppy financial waters.

Derek says he's owed more than �15,000 by customers who are slow to pay.

To ease his cash-flow problem he hoped his bank would give him an overdraft as they had in the past.

Even though he is an established customer, and paid off his previous overdraft in full last year, Derek was told his credit rating had slipped due to an old credit card debt. So, no overdraft.

Derek Grier considered closing down when he could not get credit

For Derek, that was a serious problem. He considered closing down.

Talk by politicians of extra money to help struggling firms raises a hollow laugh from Derek.

He told me: "I cannot find it, my government-appointed advisor cannot find it, my bank manager cannot find it, so where is this money?"

The banks would only talk to me privately, not on camera, and not about individual cases.

Despite the anecdotal evidence they argue it is business as usual.

They know people suspect they are restricting lending but they insist they're not, honestly.

Neither has their criteria for giving loans changed.

Yet two of the four businesses we are following seem equally convinced that their experiences demonstrate the day-to-day reality for small Highland business is somewhat different.

Watch Simon's report on Newsnight Scotland on BBC Two Scotland at 2300 GMT on Tuesday 24 February.

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