At first glance, I wasn’t that impressed by the recent MicroScope story headlined “Barclays open for channel business” . It had nothing to do with the quality of the writing I might add but everything to do with my scepticism over the willingness of any of the UK banks (not just Barclays) to provide credit to businesses, especially SMEs, in the current climate.
It’s not as if I’m alone in thinking this. It’s been a longstanding issue since the financial crash and, to date, all efforts (such as they were) to force the banks to open up their purse strings and lend to businesses have met with a pitiful response. The story even makes a reference to reports from organisations such as the Forum of Private Businesses, organisations that should know what they’re talking about, that SMEs have given up asking for credit from banks in exasperation because they don’t think it’s worth the effort.
My cynical side tells me that what we have here is Barclays making sure people know it is still around, especially those businesses it would be comfortable providing credit to. In tough times when many more credit applications are being knocked back, the pool of companies that banks are willing to lend to is obviously much smaller. It’s in the banks’ interests to make sure those companies are aware they are still open for business so there’s no harm in going out and spreading that message.
Lorraine Ruckstuhl, corporate director at the technology, media and telecoms unit at Barclays, appears to say more or less the same thing to MicroScope: “We see part of our role getting the message out there that we are willing to lend to those with a good business model.”
Now, no one can seriously object to the second half of that statement. After all, if banks started lending to companies with bad business models, where would we be? 2008 probably.
But there is an issue over what defines “a good business model”. Many people, for example, might question whether banks as they exist today have a “good business model” but it hasn’t stopped governments from propping them up. I can’t help feeling that one company’s “good business model” could all too easily be another bank’s unacceptable credit risk.
One thing that is encouraging is Ruckstuhl’s suggestion that the bank would be willing to provide transition loans to help companies move from a traditional transactional business model to a monthly recurring revenue one. I have to say that’s a good idea and one that fits neatly with where the industry is heading. Again, though, there might be a problem when a reseller tries to demonstrate its business model is good enough to merit a loan. Would it be easier or harder to get a loan for moving from a ‘bad’ transactional business model to a “good” recurring revenue one?