Banks struggle to find the SME factor
Allegations against RBS’s treatment of struggling small and medium-sized enterprises have once again cast a harsh light on banks’ treatment of these companies. While banks deal with zombie borrowers and tout loans at fat margins to stellar SME credits that don’t want them, it is SMEs in the middle ground that need more help.
Last autumn Euromoney ran a conference that brought together SME borrowers, banks and alternative providers of finance to debate the growing role of new institutional lenders in filling the funding gap for small and mid-cap corporates left by a deleveraging banking system.
Graeme Charnock, chief financial officer of UK ports operator Peel Ports, seemed to speak for many SMEs when he described the difficulties they faced in refinancing credit previously made abundantly available by the banks. With £1 billion of refinancing to do by the end of 2013 and an additional £300 million of capex to fund, the company had tried to get ahead of the problem a year early. "It was clear we couldn’t do all our refinancing with existing banks. That was a non-starter. As well as the major UK players we had a lot of European banks in those earlier facilities that were no longer with us."
Peel Ports scoured the market for other options. It was pleased to find some appetite from asset-hungry banks from outside the region, notably in the US and Australia. It secured a European Investment Bank facility, which gave a halo effect, attracting other lenders to financing its capex project and also brought welcome flexibility on terms and maturity.