Big fish need to start feeding minnows

There’s a letter to the Times today from the Chairman of the Federation of Small Businesses, John Walker.

Unsurprisingly, the FSB welcomes Mandy’s arm-twisting to get banks lending to customers again. After all, we now own most of them.

It’s worth noting how Mr Walker sees the problem of banks’ tight-fistedness materialising. He argues that if bigger businesses were quicker payers, small businesses wouldn’t need to go cap in hand to banks.

The Government should publicly name, shame and fine companies reneging on the payment terms registered with Companies House. It is time to get tough on late payers before they put small businesses out of business.

Legally, companies have 90 days to pay an invoice for wholesale goods or services. But getting them to pay is the corporate equivalent of holding a beggar by the ankles and shaking him.

I used to be a partner in a small business. Companies would always wait until the 90th day (and often later) before begrudgingly forking out. But so would we. We would because everyone does.

It’s natural to hang onto money if you doubt it will be replaced. This fundamental lack of trust accounts for most of banks’ reluctance when it comes to lending to small businesses, home owners or one another.

Small businesses most commonly fail due to a lack of cash flow, not a lack of capital, the majority of which is relatively liquid.

Businesses will never be quick payers, regardless of size. It is down to banks alone to restart lending at afforable rates.