Several banks have announced measures that will help SMEs affected by the recent riots in London, Manchester, the Midlands and elsewhere.

NatWest and RBS will offer customers a range of solutions:

Fast-track requests for temporary credit increases provide short term financing to cover cost of repairs and replacement stock while businesses wait for insurance claims to be paid offer repayment holidays on existing loans to give businesses the breathing space they need to get back on their feet refund or waive overdraft fees incurred as a result of the riots on a case by case base basis. Other banks have announced similar schemes.

Meanwhile, businesses who have suffered damage as a result of the riots need to claim on their insurance quickly or they risk not being able to recover their losses, warns City law firm Reynolds Porter Chamberlain LLP (RPC).

RPC explains that most insurers require claims for riot damage to be notified within a very short period – typically seven days – otherwise the claim may be rejected.

This is because the insurer can make a claim in the policy holder’s name against the police to recover their losses under the Riots (Damages) Act 1886 (RDA). However, to do so that claim must normally be lodged within 14 days of the damage occurring.

Businesses that have suffered riot damage that do not have property insurance can also make a claim to recover their losses directly from the police under the RDA.

Stuart White, partner at RPC, comments: “Riots have caused millions of pounds worth of damage over the last few days.  Businesses that have suffered riot damage should notify their insurer as soon as possible so as to avoid being left without insurance cover. Any delay is an unnecessary risk.”

“Some independent retail units have been completely destroyed by the rioters, making them dependent on recovering the value of the damage to start trading again.”

“The good news for some of the smaller retail units that have been damaged is that even if they do not have a property insurance policy they may be able to recover the value of any damage sustained because of the rioting directly from the police.”

“However the compensation under the RDA will not normally extend to the financial losses of the business while it is unable to trade.  Trading losses are likely to be recoverable only by businesses with business interruption insurance.”

Stuart White adds: “Given the scale of these riots and the current pressure on police budgeting there will doubtless be calls to reform a law that compels police forces to compensate businesses and individuals for riot damage.”

“We will see whether insurers who cover police forces for the cost of RDA claims respond to these riots by pushing up the cost of their insurance.”

 

The number of businesses who believe that banks are being unsupportive has increased, according to insolvency trade body R3′s Business Distress Index.

The quarterly report, which looks at the financial position of GB businesses, reveals that one in four (24 per cent) businesses strongly disagree with banks being supportive, up seven per cent on September 2010 figures.

The Index also shows that one in four (24 per cent) businesses are concerned about their debts. Over the last quarter, worry has intensified amongst businesses who are concerned about their debt, and small businesses seem particularly vulnerable. 43 percent of businesses concerned about their debts are now worried about bank loans and finance debt; this compares with just 24 per cent in September 2010 – a 19 per cent increase.

R3 President, Frances Coulson, commented: “The increase in the number of businesses who no longer feel that banks are being supportive indicates that a growing proportion of the business community are either struggling to service their existing debts or finding it hard to acquire further lines of credit.

 

“As we have seen in previous recessions, once the economy begins to show signs of recovery creditors tend to make a more concerted effort to pursue those who are indebted to them and tighten up their lending facilities. However, we are still in the early stages of recovery and it takes time for this to translate into tangible relief for businesses. For the many businesses that used all their reserves to survive the recession, supportive creditors are more important than ever.”

According to the index businesses perceive trade creditors to be the most supportive creditors, but less so then they were six months ago. HMRC were perceived to be most supportive creditor last quarter – they are now second, with the banks being seen as the least supportive creditor.

 

Frances Coulson said: “Insolvency Practitioners working with distressed businesses are seeing an increase in the number of Time to Pay applications being rejected. This may well explain why HMRC is no longer seen as the most supportive creditor.”

Across the sectors, retail and distribution businesses are most likely to believe creditors to be supportive; conversely, the report indicates that 83 per cent of retail and distribution companies are experiencing at least one sign of distress. This compares to 77 per cent of manufacturing firms and 65 per cent of service firms.

Frances Coulson added: “The fact that more retail and distribution firms are struggling while at the same time stating that creditors are being supportive, suggests these businesses have had to call on these creditors. With VAT rises being absorbed by many retailers and evidence that consumers are tightening their purse strings, it is not surprising that the retail sector, in particular, is showing more signs of distress.

“Despite the worrying minority, the report reveals signs of distress on the whole have decreased this quarter, which can only be a good thing.”

Aldermore, the new British bank, has increased deposits by more 176 per cent in the last year from £229.6 at the end of 2009 to £633.6m at the end of December 2010.

The number of savings customers for the bank has increased from 8,500 at the end of 2009 to 30,000 at the end of 2010.

Phillip Monks, CEO of Aldermore, said: “This is conclusive proof that we have created a bank that can attract long term, secure deposits.”

“Because of our bank’s low cost base and the state of the art processes and systems we have put in place we have plenty of headroom to lend out that money prudently and profitably to the UK’s small and medium sized businesses.”

At the end of 2010 the bank had outstanding loans to SMEs of £410.2 million, an increase of 107 per cent on the £198.6 million 12 months ago. Asset finance was one of the strongest areas of Aldermore’s growth with funding provided to SMEs increasing by 206 per cent to £69.8 million (end Dec 2010), up from £22.8m 12 months previously.

Simon Healy, head of savings at Aldermore, explained that customers at Aldermore are increasingly choosing the bank’s longer term savings products: “Aldermore has been very careful to ensure that longer term savings products are attractive and match what customers are looking for, as longer term savings products can have a really positive impact on our overall financial performance.”

“We believe our savings business offers the right mix – very decent interest rates and simple and transparent products all backed by friendly and efficient service. That is why we are producing such strong growth and have such a low customer churn.”

A new website designed to target support to growing businesses has been unveiled by Treasury Minister Lord Sassoon. The site, developed by the British Bankers’ Association and the UK’s largest high street banks, will provide a range of tools and factsheets to help firms access the finance they need.

Speaking at the Better Business Finance roadshow in Sheffield, which is the first in a series of free UK-wide events where businesses can come along to talk to lenders and participate in workshops and seminars, Lord Sassoon said:

“As a Government we have been working hard with the banks to try and get credit flowing again. Today, I am delighted to be able to announce the launch of http://www.betterbusinessfinance.co.uk/. The site provides a one-stop-shop for businesses from which they could get impartial information about how to secure finance and consider the best options available for their business. It also includes a series of fact sheets about many of the issues that matter most to them, so I urge businesses to visit the site.”

BBA chief executive Angela Knight said:

“Making the right impression is as vital for business as for individuals. Our new website – http://www.betterbusinessfinance.co.uk/ – is designed to put businesses in touch with the kind of practical help they need to help make any application for credit a winner. It will also let people know where they can go for additional help and support including our calendar of regional roadshows.

NatWest has joined forces with entrepreneur James Caan to help more people set up successful businesses. As part of the bank’s free online Business Knowledge Series, James Caan will be joined by Peter Ibbetson, NatWest small business chairman and Amanda Faulkner-Whalen, founder of successful start-up Fab 3D Ltd, to offer advice for start-ups in a live interactive event online. By registering for the event participants also stand a chance of winning a one-on-one mentoring session with James.

On 16^th March 15:00 GMT, the expert panel will share their experiences in turning an idea into a successful enterprise, including how to market your business, manage cashflow and improve the chances of securing bank finance. Viewers will also get the opportunity to question the panel on the issues affecting them. After registering for the online event, one lucky participant will be randomly selected for a personal business mentoring session with James Caan at his Mayfair office in London.

James Caan, said: “There’s no single guide that will tell you how to run a profitable business but people who seek advice early on will always stand a better chance of success. Hopefully by sharing my experiences at this event I can encourage more people to turn their idea into a successful enterprise.”

Peter Ibbetson, said: “Britain’s recovery relies on successful new businesses entering the market so we’re delighted James is joining us to help them make the first steps. We’re helping nearly 2,000 businesses get off the ground every week – so there are clearly lots of opportunities out there.”