A MOVE to set up a credit adjudication service for cash-strapped businesses has been dismissed as too bureaucratic.
Chancellor Alistair Darling announced the setting up of the independent body in last month’s Budget as a way for companies to challenge the banks if they are refused credit.
The credit adjudication service will have statutory powers to overturn the lending decisions of banks.
But commercial finance broker Galapark Finance believes the move will simply create another layer of red tape.
The London-based financial experts insist that small to medium enterprises (SMEs) deserve a quick answer when they need to borrow money.
Bill Barclay, director of Galapark, said: “SMEs often need quick decisions. A new layer of red tape like the credit adjudication service won’t help to alleviate the situation.
“SMEs need finance when the deal is there, not some months down the line.”
He said Galapark often received borrowing applications for finance that were “totally inadequate” and understood why banks turned down some bids.
He added: “Maybe if SMEs took the time to present their application in a more ‘business-
Galapark have urged companies to follow the C.A.M.P.A.R.I. Method when it comes to applying for credit. It says C.A.M.P.A.R.I. stands for:
• C: Character – The borrower should show the lender they are a reliable “can do” person who is willing to succeed and can make things happen
• A: Ability (to repay) – Borrowers need to prove they can repay the loan
• M: Margin – Lenders balance the risk to reward ratio through margins. If a borrower’s proposal is high risk, lenders will want a higher margin of interest. So borrowers may have to lower the risk s involved
• P: Purpose – Borrowers need to show the investment makes sense and will bring a worthwhile return
• A: Amount – Applicants need to get the amount they want right. Ask for too much or too little and it shows that they don’t know their figures
• R: Repayment ¬–Borrowers need to show they have the means to pay the capital and interest over the loan term, otherwise they won’t get the loan
• I: Insurance (Security) – Borrowers have to prove they have enough assets to ensure the lenders gets their money back if everything goes pear-shaped
Galapark added that leasing can also be an alternative way for businesses to obtain plant and machinery without capital outlay, although ability to pay is again crucial.
The company also believes that the method of Invoice Finance can work well for some businesses. This involves a lender giving up to 85% of the amounts on the invoices a business sends, with the remainder being paid out at a later stage.
Mr Barclay added: “The first port of call for any business seeking finance is their bank manager. However, not all banks have the same lending criteria.
“As a commercial finance broker, Galapark Finance has relationships with a wide range of high street and specialist lenders. Commercial mortgages are available for owner occupiers and investors as well as developers.”
Galapark Finance (http://www.galapark-
