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Obtaining credit ? small firms penalised

I feel I should record my recent (successful, sort of) attempts to obtain credit. We are actually doing fairly well at the moment (all things considered) but I decided I needed a small one year loan of about £3,000 to help me pay my tax, and help fund the purchase of a new printer and a few other bits and bobs.

About five days ago I telephoned Exclusive Benefits Plc, a finance company originally recommended by the Law Society, which I have often used in the past to get business loans. The first news I received was that they had been told that they could not lend to solicitors firms with less than three partners. "I?m so sorry" said the nice man at EB, "I know it goes against all that the government has been saying, but that is what we have been told by lenders". He then went on to say that they could make a loan to me, but only on a personal basis. The main difference, it turned out, was that the money would be paid into my personal account rather than the business account, and as the main purpose of the loan was to help me pay my tax, that would be all right.

He then broke the news to me that the APR would be 17.9%. "What!" I yelped, "But bank base rate is 1.5%!!" ?I know, I know? he replied "but the banks are very unwilling to lend and, as the loan is only for £3,000, that is the best we can do". Well I need the money so I told him to go ahead.

The next day he rang back, even more apologetic, to tell me that he had now been told that the APR would be 24.4%. "I?m really sorry about this" he said "I don?t like having to quote interest rates at over 20%, but that is all that is available". However we worked out that the actual difference to me would be about £9 per month, which looked at in that light is affordable, if annoying. "And you can always pay back the loan early if you wish" he reminded me. We agreed that he would send out the paperwork to me, but that I would have a word with my bank, Lloyds TSB, to see if they could do any better.

I then rang my bank manager, a new manager who I have not yet met or spoken to. His assistant said that he was on an appointment, and could she help? I told her that I was enquiring about a small one year loan of £3,000 to help pay my tax. "Well", said the assistant, "I think you had better make an appointment and come in and see him". I explained to her that I already had an offer of a loan elsewhere but only at a very high interest rate, and was ringing up to see if my own bank could do something better for me. However it would not really be economic if, to obtain this, I had to give up half a days work. Could I perhaps speak to my bank manager about it, and see what the prospects were? She said that she would pass my message on and that he would get back to me. I am still waiting for the call.

So reader, I have now signed the paperwork for the 24.4%APR loan and will hopefully receive the money in the next few days. The lender, in case you are interested, is the Co-operative Bank. I suppose I am lucky to have got a loan at all in these days. But is it very disheartening to learn that small firms are being discriminated against by lenders in this way, after all we have been told by government. Something should be done about it. Gordon?

Full post as published by The Landlord Law Blog on January 18, 2009 (boomark / email).