High street banks must make way for CDFIs

High street banks are being told to step aside in order to make more room for CDFIs. This is due to the fact that CDFIs are in a better position to make capital loans to social enterprises and SMEs.  Lib Dem Peer Baroness Kramer spoke this week at the CDFA conference and stated that for the high street banks SMEs are never going to be the right clients.

Therefore, they need to step aside so that someone more suited to take care of SMEs can take over this role. In their place, community development finance institutions are often able to fill the void. Kramer also went on to say that she has realized for quite some time, that for high street banks SMEs and small business are not the right clients, but high street banks refuse to come out and admit it.

She stated that if SMEs were aware from the start who would work with them and who would not, they could stop wasting time and simply start to look at CDFIs.  She said the reality of the situation is that high street banks simply do not have the right type of relationship management to help out a SME that needs personalized attention.

Irene Graham, the managing director of business finance and strategy initiatives for the British Bankers Association responded with a quote about the SME finance monitor, stating that they found that over the last four quarters about 70% of all businesses did  have the right financing options and were happy with their lending partners.

In addition, the SMEs that have needed overdrafts approved have met with success 90% of the time. This indicates that businesses that are not getting the right type of finance may have other circumstances that are playing a role in their denial.