NOW WE KNOW. Two senior retail banking managers have admitted that when it comes to lending to small and medium enterprises, and more so to start-ups, the banks take a rather conservative view. This is but a mild if interesting confession, given that in Europe small companies represent at least about 35 to 45 per cent of retail bank business and 20 per cent of the profits. But what do foreign-owned banks care about the small business sector in Barbados? As I have said here before, retail bank business models are dysfunctional and not fit for purpose in a post-modern society. If Facebook, Microsoft, Apple, Google and most of the other leading new companies had to depend on banks to fund their launch, they would still be ideas being played about with by students. All were funded by venture capital – men and women and the occasional investment bank willing to risk huge sums of money on the outlandish business ideas of imaginative young people. Take young entrepreneurs and banks: to even get to see the manager, the young person must have a business plan, fundamentally a work of fiction, and be able to persuade the middle-ranking manager that the proposed business, as explained in the plan, is workable. According to the bank’s business model, the manager, who often has very little leeway of his/her own, will ask for collateral before even offering less than the business plan justifies or is being asked for. Barbadian banks are even tougher. I was told sometime ago by a young man that he approached a bank to borrow $20 000 to fund equipment for his small business, and was turned down flat. Yet at the same meeting the manager offered him $20 000 to buy a car. There could only be two explanations for this, one cynical and the other criminal. The cynical view is that the manager was making a point about the likelihood of his plan working; the criminal one is that he realised he did not have the authority to lend the money to a small start-up business but was inviting the young man to apply under the guise of buying car, then he could use the money for his business. That would be obtaining money by deception, fraud or any number of offences under the Theft Act. This is where a progressive government could step in with dynamic and innovative fiscal policies to encourage venture capital and business angels to provide the funding for start-ups. The Small Business Unit, although well intended, suffers from the same problems as the civil service generally – bureaucratic constipation. Instead of offering a service that helps people with bright entrepreneurial ideas to see them through into commercial businesses, the unit is more obsessed with process. Filling the right form in triplicate, with the right signatures on each page, is far more important than mentoring and coaching would-be business people, including helping them to manage their cash flow, the lifeblood of all businesses. Experts now accept that the first three years of a new business are the ones that will determine whether it will sink or swim. These are the years when the business is most susceptible to the vagaries of the business world. It is during this period that most new business people want someone to hold their hands, not academics or civil servants, but experienced business people who have been through the kinds of situations they are now about to encounter. They need people to share the burden of paper work, employment and revenue law, dealing with customers and banks, all the things that take them away from their core business. They also need reassurance that a business plan is not exclusively a blueprint for funding, but more importantly a living guide as to how the business should grow if carefully managed and which should be updated monthly in its early stages. This is where the Small Business Unit could be of real help, rather than the superficiality of meetings and minutes and speaking in a kind of administrative Victorian English. It is where the Community College could be of real help.•Hal Austin is an award winning journalistwith the Financial Times. He is Barbadianand may be reached at hal.austin@ft.comÂ
