We're with your business, step by step
All of us here really want your business to succeed. As a business ourselves, our fortunes are intrinsically linked to those of our customers.
That’s why we’d like to reassure you that we’re doing everything we can to support businesses like yourself, and offer help and clarity where it’s needed.
Step one, helping you get the right loan for your business
In 2011, we increased our lending to UK businesses to £43.6bn, £14.7bn of which went to small- and medium-sized businesses like yours, exceeding our lending targets by 13%.
Step two, pricing that's right
Like you, we need to do business the right way. Our industry has learnt to its cost that you can be too clever with financial instruments.
We prefer to borrow in the traditional way, from shareholders and depositors who are rewarded with dividends or interest, before lending those funds to customers that we believe can repay them. This means that much of money we are lending belongs to your neighbours, friends and family, so we have to look after their interests too.
We recognise that some businesses are questioning the cost of lending.
So we’d like to take this opportunity to show how it works. Three components make up the price we charge for business loans and overdrafts:
In order to lend money to businesses, we need to attract funds from depositors by paying them interest. We also need to aim to hold deposits for similar lengths of time as we offer loans. For this reason many institutions pay higher interest rates for term deposits - currently around 5% for five-year fixed rate deposits. The Bank of England base rate is currently 0.5%, so it is not a good benchmark for what it costs bank to fund loans.
For every loan we make, we set capital aside to ensure depositors will get their money back, even if that loan isn’t repaid. To ensure the confidence and security of savers, all banks around the world are currently holding higher levels of capital than in recent years. There is a cost to holding this capital, and as we’ve increased the amount set aside, this cost has risen along with it.
Price reflects the possibility - in our experience - of the borrower not being able to repay the loan. The higher the level of risk, the higher the price must be to cover any potential loss. We believe this is fair because low risk businesses shouldn’t subsidise the cost of high risk loans.
All three components have become significantly more expensive in recent times, driving up the price of lending to some businesses.
Step three, getting the loan you deserve
If you’re struggling to get a loan, it may be to do with your credit rating. In this case, we can help you with some simple actions to improve your credit profile.
- Balance the level of equity, capital and debt in your business
- Structure your debt so that your cashflow covers all your commitments
- Ensure loan payments are made on time and that you keep within agreed overdraft limits
Step four, doing everything in our power to help you
We’re pleased to be able to provide you with the most cost-effective business support services available on the high street, including software, consultation, seminars and training.
We’re here to support businesses in the best way we know how – with money, with services and with skills.
Our success begins with yours
Read our Borrowing hints and tips to minimise the cost of borrowing for your business.