August 5th, 2009 Add Your Comments Bookmark and Share

So that was it then? The worst recession in modern times is over quick as a flash and now all seems to be honky dory again. Certainly in the UK we are hearing reports of month on month house price rises and that “money is beginning to flow” again. What I don’t understand is why people consider this a good thing? Isn’t over inflated house prices and the “money flowing” the whole reason why things took a turn for the worse?

Perhaps most puzzling to me is the matter of small businesses. My understanding is a little like this:-

1. Banks are run on bonus culture – encouraging irresponsible lending
2. Banks lend out more money than people/businesses can afford
3. People/businesses can’t afford to pay back what they borrow
4. Banks right off debt, huge shit storm ensues

Because of this the banks have been told that they must now be much stricter with their lending. But but but…on the other hand they are being told that they must increase their lending. So they need to increase their responsible lending then? Certainly when it comes to business loans the banks are getting huge amounts of stick from small businesses that want to borrow money to tide them over during the recession? So you want banks to lend money to small businesses that are fearing the worst during the recession? Is nobody else’s spidey sense going of here, how the hell does that fit in with responsible lending*.

“Dear Mr Bank Manager, my business has been in the crapper ever since the recession started but if you could just lend me some money to keep me going for another 6 months then I MAY be able to pay you back some time. ps if not just add me on to that bad debt list you have”

In my mind being in debt and being responsible just don’t go hand in hand unless it’s exceptional circumstances. The responsible small business owner should be looking at how to be more efficient, not to the banks for money. Any business person with half a brain has the rainy day fund don’t they? If it doesn’t work out during a recession then I’m very sorry but that’s just life, retrain, do something else. I just can’t get my head around this whole going under as soon as the credit stops flowing thing. If you need to borrow money on a month to month basis to operate then you have cash flow problems, sort them out. Get payment up front, perform credit checks on potential customers, be more pro active in chasing payment etc Either that or your business simply isn’t profitable.

I know this sounds like I’m preaching here but it annoys the living hell out of me. I have a 13 year old daughter who is going to be saddled with government debt for her whole working life. This is just another of those facts of life. But what I would HOPE is that during that time she will also get to enjoy a career (whatever it may be) in a business built on solid foundations and growth, not on month to month bank loans. Recessions are all about survival of the fittest but in our new modern namby pamby PC world we’re just not prepared to let it ride out. The economy would find a natural level from which to start growing, as would house prices. We can’t wait for the slow turn around and slow growth built on solid business fundamentals, we want it all better, right now. In essence we want to borrow money to cover our existing debt. And because of this I honestly just think we’re delaying for recession mk2, not only will my daughter be paying of our generations mistakes with her increased taxes for her whole life but she’ll also have the pleasure of having to weather the real recession that we seem determined to put back for our kids. This pisses me off.

*Yep I appreciate the irony of the banks having to borrow money to survive themselves. The trouble is that unlike most businesses we’ve made them a necessary part of modern life (How many of us get paid in cash these days?). The fact is as well that until the UK Government started pressuring them into lending again it looked as though they may have just about learnt their lesson.