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Rbs To Suggest Peer-To-Peer Lending To Rejected Business Loan Applicants

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http://www.theguardian.com/business/2015/jan/22/rbs-business-loans-peer-to-peer-lending

Royal Bank of Scotland, Britain’s biggest lender to small businesses, will start steering rejected corporate loan applicants to alternative finance providers from next week.

RBS, which provides a third of all lending to small and medium-sized enterprises in Britain, said it expects to advise thousands of businesses to contact peer-to-peer lenders Funding Circle and Assetz Capital.

The scheme comes ahead of government plans to make such referrals compulsory after criticism that Britain’s biggest banks are failing to provide sufficient credit to a sector the government sees as having an important role in stimulating the economy.

“A key part of our long-term economic plan is to ensure that British businesses are able to access the finance they need to grow and succeed,” George Osborne said.

Peer-to-peer lending has grown rapidly since the financial crisis of 2007 to 2009, with bank credit remaining scarce for small businesses. These new services allow investors to lend directly to individuals and businesses via low-cost online platforms.

So the govt owned bank pimps private firms?

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If the main commercial banks not eager to lend, despite FLS/QE galore, ultra low rates, then perhaps be concerned for commercial outlook?

Not all of these in the mix, yet. Repairing their balance sheet, for hpc/tougher times, with less exposure to it?

The timidity of the banking system appears to have been general and widespread. Indeed, the 1939 survey found that over half the reasons given for credit refusals by banks were "bank policy"; only a third were because of "the condition of the borrowing concern." -Michael A.Bernstein. The Great Depression - Delayed Recovery and Economic Change in America, 1929-1939
Watch the growth of currency as a crucial sign that the economy is headed for a deflationary contraction. A common feature of economic slumps is credit revulsion. Even good borrowers find their welcome mat withdrawn. When the music stops, the attitude of lenders hardens. Banks will slash credit and call loans even to good customers. They will be driven to do this in part, because of growing demands to hold cash. When the public raises its demands for currency, the banks have no choice but to shrink. Each time commercial bank obtain refills for their customers, they must reduce their reserve accounts with the central bank. If the customers suddenly prefer low-leverage money - cash - the banks are obliged by the logic of leverage to reduce their lending. $1,000 in the banking system can be leveraged at 10:1 or more. $1,000 in a mattress is not leveraged at all.

With the value of real estate collateral falling, the true market value of construction and other real estate loans will fall. Bankers like other lenders, like their predecessors after 1929, will not wish to magically turn one dollar of cash into a loan worth just eighty cents, much less sixty cents. When the value of collateral falls, and the public's demand to hold cash rises, even easy money at the Fed may not stop deflation. Cash could be hard to come by, and idle credit lines may be withdrawn. If your business has seasonal needs, anticipatory borrowing may make sense. If you cannot secure irrevocable letters of credit, you may wish to borrow now. You can place the cash your realize from anticipatory borrowing in interest-bearing accounts, and absorb the loss as a price of doing business. It could be cheaper than dealing with a loan shark, as many small businesses were forced to do in the last depression.

Edited by Venger

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UK banks and their lack of lending to SMEs has been claimed to be a problem for many decades now.

Messrs Cameron/Osborne again making a populist statement just before the general election. That's after 5 years of being in power and having done everything possible to divert money/lending into house prices.

It'll make no difference. After the election give it time and in a few years they'll be coming out with that same old populist stuff yet again.

Refer them to peer to peer lending - do they charge for such advice.

Edited by billybong

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doesnt much crowdfunding involve zero returns or interest in the loansdonations.

Its like the bank is really saying "sorry guv, you are too poor to get a loan, suggest you try chugging a tin at the door on the way out."

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If the main commercial banks not eager to lend, despite FLS/QE galore, ultra low rates, then perhaps be concerned for commercial outlook?

Not all of these in the mix, yet. Repairing their balance sheet, for hpc/tougher times, with less exposure to it?

The reason RBS cannot lend much is because of a lack of capital, not a lack of funding. The government can throw as much FLS funding at it as it wants, but it cannot lend to everyone. All the other banks are in a better position to lend.

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If the main commercial banks not eager to lend, despite FLS/QE galore, ultra low rates, then perhaps be concerned for commercial outlook?

Not all of these in the mix, yet. Repairing their balance sheet, for hpc/tougher times, with less exposure to it?

The reason RBS cannot lend much is because of a lack of capital, not a lack of funding. The government can throw as much FLS funding at it as it wants, but it cannot lend to everyone. All the other banks are in a better position to lend.

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I've always said peer-to-peer lending is a disaster waiting to happen.

This just confirms it.

Lending to people/businesses who can't get money from a bank. That is not a great population to fish from if you are the lender.

+1

I've yet to see a decent profitable business with a credible business plan fail to raise a sensible amount of debt from a high street bank.

Those who get turned down are, in my experience, loss making/very high risk with little track record/looking for far too much money with too little security.

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The reason RBS cannot lend much is because of a lack of capital, not a lack of funding. The government can throw as much FLS funding at it as it wants, but it cannot lend to everyone. All the other banks are in a better position to lend.

Possibly so. Although seemingly they have capital position sufficient to make significant loans to back their commercial judgments (perhaps they had hedged positions?). My own view is they don't want to take on complacent bubble-world borrower applications who can't see risks ahead.

24 Jan 2015

British banks including Royal Bank of Scotland and Barclays may be sitting on billions in losses from the collapse in oil prices after a surge in junk loans to the industry.

UK banks have been behind more than $50bn of leveraged loans — high-yield, non-investment grade debt — to the oil and gas industry in the past four years, according to data from Dealogic.

..According to Dealogic’s data, RBS has arranged $14.3bn of leveraged oil and gas loans in the past four years, making it the biggest UK player in the high-yield space.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11367125/Oil-collapse-could-trigger-billions-in-bank-losses.html

+1

I've yet to see a decent profitable business with a credible business plan fail to raise a sensible amount of debt from a high street bank.

Those who get turned down are, in my experience, loss making/very high risk with little track record/looking for far too much money with too little security.

Agreed. Chief of one the big investment firms was complaining, a few years back, in the FT or Times, that they didn't have enough viable projects to invest their money in. He was inviting would-be borrowers to write in to them, not going to the bank. If you have a real commercial winner, you will get all the money/debt required.

If peer-to-peer lending is a future disaster waiting to happen, which is my view also, then know this - no one forced anyone to lend or borrow for business purposes.

That some dead-money savers, are waiting for such financial distress to occur, so as to take position/equity at more sensible prices - and perhaps even see them forced to put their homes on the market and seek lower asking prices (for HPC).

Run campaigns NOW, protest to some authority, if you are anti-capitalist and against the freedom of individuals making their own commercial decisions; which are usually higher risk anyway, and too often outbidding those of us who are patiently waiting for better value, and distorting values in the wider commercial world where others fear to tread at such prices. Not all the violins 'they're all victims' stuff after the event.

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Well a cynic might think the banks are worried about the competition, so they want to make it harder for the peer-peer sector by passing them all their most risky prospects.

Are the requirements for a peer-peer loan any less stringent than those from a HS bank?

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