Banks wrecking businesses – surely not

Another non-astro post, so if you’re not interested please stop reading here.

A certain Bank has been accused of wrecking small businesses, as if this is some kind of new behaviour – sorry, it is not.

In a past life I was deeply involved with UHV precision metal-bashers (engineers) and one guy in particular became a good personal friend of mine.  He had run a precision engineering firm for something like 40 years and during that time had always been in the black.  Clearly this popped up on the local Bank’s radar.  He was paid a visit by his local Bank manager who proposed he should take out a loan (he didn’t need any loans he was doing alright thank you very much) to build a huge warehouse-like extension on the back of his factory.  Why?  So he could expand his business – and here’s the best bit – the manager said, even if you don’t expand and you hit hard times, you can still rent out all that extra space – it’s a win-win situation.

You can probably see it coming from a mile off can’t you.  He was paid a visit because the Bank was well aware that a tough period was right on their doorstep.  Yes times DID suddenly become hard, and what happens in hard times?  People tighten their belts and there’s nobody out there looking for huge warehouse type spaces to rent.  What happens next?  Of course – the Bank asks for its loan back.  And so a business that had run profitably for over 40 years had to fold.  Nice isn’t it.  Within a year of the Bank’s visit a profitable 40 year old business had closed with all the added fallout of job losses and distraught families.

I didn’t know my friend had actually done this, otherwise I would have warned him off knowing the way Banks operate.  After having to sell his business and then suffering pretty tough times for a few years he did manage to start up again and got another precision engineering company underway, but he had lost those 40 years of profitability and had nothing to show for all that time he was running a successful manufacturing business.

Banks wrecking small businesses – it’s nothing new!!

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