"Financing projects from £50,000 to £100 million"

Banks raking in fees from struggling businesses

Banks raking in fees from struggling businesses

Banks' restructuring divisions are setting their own agenda at the expense of their business customers, Business Secretary Vince Cable has learned, as a corrupt relationship between lenders and accountants leaves struggling businesses drowning in bank charges.

 

Lawrence Tomlinson, a representative of SMEs in the Business Department, said that lenders were imposing their choice of auditor upon struggling firms – an issue that carries implications of anti-competitiveness.

Mr Tomlinson, the Head of LNT Group, has been acting as a conduit between small firms and government since the spring.

He took his concerns to the Business Secretary following complaints from a number of struggling businesses that they are facing the high costs of business reviews conducted by auditors that have been forced upon them by banks.

Companies that struggle to pay back bank loans or which experience cash-flow problems can face an independent review if they are referred to the lenders' restructuring divisions.

But the costs of this review are met by the struggling businesses, which often have no choice but to accept the auditors imposed upon them.

Large auditors are appointed to conduct their review under the guise of independence, but allegedly follow directions from banks to rake in returns.

Bank staff often call the shots, a whistleblower told the Telegraph, as they receive commission on the fees imposed upon struggling businesses and act completely off-record as “shadow directors” of the businesses.

Businesses have complained that the punitive charges are detrimental to their future prospects and risk damaging growth at a crucial time for the economy.

And the revelations come after the Chancellor of the Exchequer, George Osborne, responded to the 571-page report from the cross-party Banking Standards Committee, pledging to implement most of its recommendations.

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Tuesday, 09 July 2013 10:37
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