Banks returning to profit as small business lending suffers

HSBC Bank PLC - 00014259 reported a $11bn profit at the beginning of this week, closely followed by Northern Rock PLC - 06952311 also reporting a return to profit and Lloyds Banking Group PLC - SC095000 managing to hold on to £1.6bn for the first 6 months of 2010. RBS and Barclays Bank PLC - 01026167 are expected to report similar figures this week.

Even though these banks are illustrating that there is potential recovery in this industry since the beginning of the financial crisis, these positive figures are just a kick in the teeth for UK companies who are struggling to expand or even save their businesses and feel that these very institutions are failing to support them to that end.

The Chief Executive of the British Banking Association stated that between 85% to 90% of business loan requests are granted - which doesn't seem to ring true. What these figures don't tell you is that these loan requests are granted on the banks' terms - terms which are not particularly favourable to the person asking for the finance so they are rarely taken up. Reasons such as exceptionally high interest rates and the introduction of factoring and invoice discounting mean that many businesses refuse the offer because this isn't what they were envisaging in terms of finance. So, even if at the minimum 8 out of 10 requests are granted, the truth is that only 2 out of 10 are actually drawn down as loans. And this isn't just one bank - this is all of them, offering similar terms to each other making it harder and harder for a business to agree to something that they're unhappy with.

So, it is of no surprise that there are many belligerent business owners out there who aren't particularly impressed with the bank who are flaunting their large half-yearly profits.