The great EFG scam

Lots of talk in recent days, weeks and months about whether banks are giving support to small businesses.

I’ve even been part of the All Party Parliamentary Group on Small Business at the House of Commons and heard from the heads of the banks protesting how much support they are giving.

So I decided to put them to the test – and a few months ago applied for an EFG loan for one of the companies I am involved with.

This company has been going for three years, has growth and profitability – but operates on minimal working capital. It has attracted some significant opportunities through which it can grow signifcantly over the next 12 months – but needs additional short-term finance to fund these.

All the application forms and papers went to NatWest back in May – along with last accounts, a business plan and cashflow forecasts.

So far so good – but what then followed was evasive communication, apologies that the Business Manager was too busy to deal with the case, was away, then needed bits and pieces of additional information (all of which were immediately provided).

Finally, after chasing by phone, text and email to the point where this became almost daily, and leaving numerous messages – most of which went unanswered – some TEN WEEKS later I received a curt email which said:

Your application has been assessed and regrettably it has not been successful with ourselves, I have discussed the application with my Area Director who has suggested that Equity funding may be the alternative route to explore to give the business the cash injection which is required to fulfil your projections.
Thank you for your patience and may I wish you well for the future.

Equity funding for a short term working capital requirement, forecast to be repaid within 24 months?

Just my humble opinion, but if we are to restore the economy of this country we simply can’t leave the decisions about business support in the hands of over-worked jobsworths who haven’t got the first clue about how to run a business – and who take 10 weeks to respond to a simple request.

To add insult to injury, NatWest (of which the taxpayer owns 83%) has just spent £millions on an ad campaign trying to tell us they are a ‘Helpful Bank’.

Oh, and by the way just reported profits of £1.6 billion for the first half of this year.

Just my humble opinion, but the banking system in this country is a disgrace.

I’d love to hear from you if you’ve had an experience of applying for EFG support – whether positive or negative.

Am I in the unlucky minority which the system has spat out? Or is the story the same for businesses all over the UK?

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11 thoughts on “The great EFG scam

  1. I haven’t even tried to apply it’s hard enough just to get a decent rate bank account for a start-up.

    This ‘support’ is more a kick in the teeth. I’m glad I can feesably run my business out of paypal and not have to deal with the banks.

  2. I am a commercial finance broker and have been saying for years that the Banks have not been lending, but all we get is that they are supportive of business, but there is a “shortage of quality applications” I am guessing your ‘application’ was one of those which lack the required quality.

    It is quite simple the Banks have been busy rebuilding their balance sheets and are still not comfortable lending. I am due to send in an EFG application next week, so I will see what the response is then. One thing is for sure I will not be waiting 10 weeks for a response, as the arrangements I have with the lenders do mean I get fairly prompt responses, even if they are negative.

  3. The tied is turning. New businesses operated by sole traders are begining to shoot up at the expense of existing businesses served by groups of people.

    The mobile hairdresser, the car mechanic, the website designer, the computer repair man, the homebased estate agent, the handyman are all set to grow from the ashes.

    If you cannot control your cashflow then don’t ask for anyone else to bail you out. Get lean or get out.

  4. Jeremy is right, many of the banks are trying to shrink their liabilities to match their funding, thus reducing their dependency on the capital markets. This is a good thing for the economy in the longer term. However, that combined with a need for greater regulatory capital and a need to be more risk averse in their lending does mean that it appears banks are not always supporting SMEs. Its not the case, we just need to get used to a more restricted access to capital. What we had before was far too loose.

  5. Applied for EFG through Barclays, they were very good and were happy to pass us to the EFG stage,unfortunatley EFG does not support share purchases and we wanted the money to buy another business to continue our growth, so a lot of lost hours.

  6. Luke, you can always try and get more creative and develop a mutually agreeable strategic partnership with your acquisition candidate. You don’t need to buy the business.

  7. Hi Stephen, I did try this approach but they were looking to move on – we were open to ideas. Although we can service the loan, we do not have the security for it. Our approach instead is to push harder on our growth strategy. I had enquired at Natwest but after explaining they didn’t bother to come back to me.

  8. We secured an EFG through Natwest the end of 2009. It took nearly 3 months, required us to restructure our shareholding so that we didn’t have to secure the loan on our family home, required extensive time from the NWDA (thank you!) and in the end took daily phone calls with the South Cheshire director for RBS. You’d get the impression we were asking for lots of money? Well, actually a small £50k!! They’re now trying to find an excuse (in my opinion) not to give us the 3rd drawdown, which leaves us with short term cash flow challenges to say the least!

    My current business funding plan – 0% credit cards and personal loan for “home development” whilst I court a number of equity investors.

    End Rant!

  9. Hi Rachel

    This is the first time I’ve read your blog and I must say I am impressed by the depth of the articles. It is really hard to come across the spoken/written truth anywhere nowadays. Glad that someone of your status and calibre is taking time to address issues that affect every day people with facts and figures. Please keep it up. It’s highly admirable.

    With reference to your most recent post – ‘S’not fair’, it’s time we all sat up and faced reality. It’s time to take responsibility for our actions and live life with the seriousness the forefathers of this nation built it with.

  10. We found our bank was reluctant to provide details of an EFG loan and when pushed tried putting us off with ridiculous debenture and guarantee charges. She told us it was a very lengthy process and hard for a loan to be approved. Obviously the bank would happily provide us with an overdraft for the amount for 14.50%!! We have just submitted our application so fingers crossed won’t be 10 weeks.

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