Yorkshire Bank to plug small business credit gap

The lender is currently consulting internally on the strategy which is expected to involve launching new products and a marketing campaign to target the sub-1m turnover market.

Led by Gary Lumby, director of small business banking, Yorkshire and sister bank Clydesdale will pledge to offer many small businesses face-to-face services instead of the call centre contact often offered by the UK's big retail banks. It will also promise to answer loan queries in 48 hours.

The lender, owned by National Australia Bank, hopes revamping its small business proposition will build its market share from less than three per cent currently.

"Small businesses are saying that banks are generally not open for business and they are finding it difficult to access credit at the right price," said Mr Lumby, a banker of more than 30 years.

"Other banks have moved small businesses up the food chain. That generally means you talk with a call centre or relationship team.

"What we are seeing is signs that demand is starting to pick up. We will see a lot more people wanting to start up in business.

"We're going back to the future. It's going back to what bank managers used to be like, without the stuffiness."

A report by the Bank of England last month flagged concerns from small businesses, many of which are still struggling to access to credit.

It said while big firms have seen an improvement in credit conditions, "small firms reported that conditions remained very tight, both in terms of cost and availability".

The report added: "There we further reports of overdrafts being withdrawn and of long delays waiting before decisions were made on loans.

"Small firms often found the application process prohibitively costly in terms of time and resource, or were discouraged by what were felt to be overly stringent collateral requirements".

Nationwide Building Society last year took a step back from the small business sector by closing its Business Investor account to new customers and limiting the number of account transactions firms can make.

Yorkshire and Clydesdale's small business proposal will be administered through their network of 72 business banking centres, 340 branches, plus call centres and online. It is expected to be rolled out within the next couple of months.

The lender will target businesses with turnover of up to 1m, although extending to 3m in some cases, which require financing of up to 250,000. Larger businesses will be referred to financial solutions centres.

"There are five million SMEs (small to medium-sized enterprises) across the UK," said Mr Lumby. "We've got a very small market share currently.

"We decided we want to give a relationship manager service to small business customers who want that service. That involves being able to see them or speak to them on their mobile phone or email them."

No figure has been put on the investment, which is likely to be time and resource-intensive.

Relationship managers will "a lot more proactive", added Mr Lumby, the former head of retail at Yorkshire Bank. Managers will have to spend at least two days every six months in a customer's business, "to get a better understanding of what it's like to run a business".

The bank will also introduce a 48-hour service agreement, promising to answer queries in two days.

Its managers' portfolios of businesses will total a maximum of 250 cases, compared with staff at rival lenders who can be managing up to 700 accounts each.

Smaller businesses requiring loans of less than 25,000 will be handled by a telephone banking service, also run by relationship managers. Mr Lumby added: "It's not a hard and fast rule – if a customer wants to see a relationship manager we will do everything we can to get them a face-to-face."