East Anglian SMEs move from mainstream banks to alternative funding

Growth Street, who are transforming the business overdraft, are currently providing just under £7.5m of overdraft-style credit lines for growing businesses in East Anglia.

It bucks the national trend which, since the financial crash in 2008, has seen the banks dial back the amount they lend to SMEs in overdrafts by 50%. Yet, in that same time, the number of UK SMEs has risen 30%.

Across the East of England, Growth Street has identified a funding gap of over £1.5bn due to the banks’ increasing reluctance to extend overdrafts to small firms.

To help plug that gap, the overdraft-style provider has committed to channelling £75m to East Anglian SMEs, and they are already 10% of the way there.

One of the SMEs to have benefited from the firm’s new take on the overdraft is Cambridgeshire’s own Lunchtime Company, who found themselves with a squeeze on their cash flow that the banks weren’t willing to support them with.

As a provider of school lunches, the Lunchtime Company unsurprisingly experiences a lull in their cash flow over the summer break. However, it’s during this slowdown in demand for their meals that the business also looks to invest to be ready for the new academic year.

To fill the hole, the firm initially applied for an overdraft from the bank. They are a strong business, with long periods of six-figure payments throughout the year, a sound balance sheet and a profitable trading history. However, due to the seasonal nature of their trade, the bank was still unwilling to extend them the money they needed.

Andy Phillips, Growth Street’s East Anglia representative said, “To have already agreed just under £7.5m of funding lines for East Anglian SMEs is a great start, but there’s still a long way to go to plug the gap left by the banks”

“As someone who has been supporting SMEs in East of England since the late 1970s, I’ve seen first-hand how the banks have stopped offering overdrafts of any great value. When I started out in business finance, the banks would have been more than happy to extend a good business-like Lunchtime with a big overdraft, but that’s not how things are anymore.”

“That’s why I joined Growth Street: to deliver the time-tested, overdraft-style facility that SMEs need, but with modern tech to bring it into the 21st century.”

Metro Bank chairman Vernon Hill stands down as bank looks to settle ship

Metro Bank’s woes were laid bare today after the troubled high street lender posted a downbeat financial performance and called time on its colourful founder’s role as chairman.

The under-fire challenger bank reported a sharp drop in profits for the six months to 30 June as it counted the costs of a major balance sheet blunder which rocked investor and customer confidence.

Pre-tax profits hit £3.4m in the first half of 2019, plummeting from £20.8m a year earlier. Customers also withdrew £2bn of deposits.

Vernon Hill, (pictured) the 73-year-old American billionaire who founded the self-styled ‘dog-friendly high street bank’, also confirmed his plans last night to leave his role as chairman as part of a management shake-up.

The hunt for Hill’s successor begins amid a flurry of new appointments that the firm has made in recent days, as it looks to bolster its senior ranks in the wake of its recent crisis.

“Vernon’s concluded that with where we are with our national growth, and where we are with regards to the longevity of the organisation, that he’s stepping down,” chief executive Craig Donaldson told the Press Association.

“Vernon is the founder and the visionary. We’ve created 4,000 jobs because of his vision.”

This week’s reshuffle is the first since the firm worried the City in January by slashing its growth plans and revealing an accountancy error in which some loans had been classified as less risky than they were.

Metro Bank’s share price has crashed more than 75 per cent since the revelation, which prompted fears of a regulatory crackdown and wider questions over the lender’s business model.

“We’ve faced more challenges in the first half of this year than we’ve ever faced,” said Donaldson. He said Metro wanted to “draw a line” under events in May when intense speculation about the bank’s future led to £1.4bn of outflows.

After the exodus the lender asked investors to stump up £375m as part of an emergency cash call to shore up its finances.

The company’s share price edged down four per cent today as investor caution mounted in the hours ahead of the firm’s results, which were released after trading closed