This feeling is most pronounced in the category of businesses turning over less than £1 million, in which 30 per cent claim to feel ‘unsupported’ by banks.
The study, commissioned by P2P finance specialist Nucleus Commercial Finance, also reveals SMEs are in the dark regarding the notice periods on their business overdrafts. Some 40 per cent of SMEs claim their banks had to give them at least a week’s notice or didn’t actually know what the notice period was.
The most popular overdraft notice period answers were three months or more than three months, with 14 per cent of small businesses and 19 per cent of medium-sized businesses claiming their banks were obliged to give them at least three months’ notice.
These results are not unexpected, says Chirag Shah, CEO of Nucleus Commercial Finance. ‘Unfortunately for SMEs, banks don’t need to give them any notice at all before removing their overdrafts – but they often don’t make this clear,’ he says.
‘Businesses work this source of unsecured funding into their budgets and rely on their overdrafts to plug working capital gaps on a month-by-month basis.’
A confusing banking experience
Zoe Hiljemark, founder of Sixth Sense PR says the initial setup of online banking for her company was ‘a bit protracted’. ‘I wasn’t completely clear on whether I had received all the necessary information I needed (several pieces of information were required and all came separately in the mail), so I had to contact them to query this twice before getting set up fully,’ she says. ‘As a result my bank account was operating for one month (I had received my first statement) before I had any visibility of my account transactions during that period.’
This wasn’t ideal as Hiljemark was unsure whether clients had paid her invoices during this period, meaning that she couldn’t thank clients for their payments nor issue receipts promptly. ‘I consider this an important part of my customer service to my clients. I also didn’t have visibility of what my operating balance was, which wasn’t ideal,’ she adds.
Jeremy Stern, director of marketing company PromoVeritas says that, in over ten years, he has only ever seen one person from his bank. ‘And for last three years our so-called Relationship Manager has been in Birmingham and knows nothing about the business, our needs or desires,’ he adds.
Rates of interest are pathetic, being 0.1 per cent on a six figure sum, Stern says, and recently when he needed to take some cash out of the bank, could not believe it when he was charged 3 per cent for the privilege.
The icing on the cake was last month, when out of the blue Stern received a letter saying that the bank was closing all of his company’s bank accounts because the business no longer fitted their customer profile. ‘This despite having never been in overdraft, no trouble on the account, significant deposits, highly solid client base, and growing,’ Stern says. It turns out it was because a while back they had sent us a questionnaire to fill in, Know Your Customer, and although we had returned it, they did not record it properly so that gave them justification to close all of our accounts, and no one thought to call us first.’
Stern is in process of moving to a challenger bank, which he believes offers better support. ‘I have seen the Regional Director three times already as part of the sign on process, and it the account pays 1 per cent on deposits,’ he says. ‘Job done.’
Further reading on business banking
