The Standards of Lending Practice was updated to give small to medium businesses much more security in July 2017. These standards have been adjusted to give small to medium businesses in North Wales and beyond peace of mind, stability and far better security – when before July 2017 these standards were only in place for the smallest of businesses which employed 4 people or less.
Chartered Accountants North Wales and beyond have widely praised this new incentive, as evaluation of a borrower’s capacity to meet ongoing repayments is a vital safeguard against insurmountable debt and financial distress.
Any business which has a turnover of less than £6.5million is applicable to enjoy this revision of the Standards of Lending Practice, and they are intended to help banks and other lenders meet their responsibility to clients and regulators by getting the big picture on a business's’ health. For instance, in the past, banks and other lenders were only required to look at a business's’ financial information.
As part of the revision to the Standards of Lending Practice, lenders are now required to look into financial information of the business, as well as the individuals behind them. That, and looking at current account turnover data and the usage of overdrafts is intended to have a lender decide whether or not a loan is appropriate.
Of course, these checks are performed on an ongoing basis in order to quickly identify changes in circumstances which may later lead to financial difficulty.
Putting lenders in the position of being able to take proactive steps for their clients in order to assist a business owner before financial difficulty becomes financial distress is a fantastic move. Having small to medium businesses able to reap the benefits of the revised Standards of Lending Practice has been received well across the country.
Saying that, it should be noted that there is absolutely no replacement for a good accountant in North Wales or beyond which is certainly capable of helping businesses make the most of their positives and take measures to minimise risk along the way.