Having a Hackney postcode makes it harder for local firms to get loans and funding from banks, the head of a local business support charity has claimed.
Richard Abbott, chief executive of HBV Enterprise, told The Hackney Post that banks are less likely to lend to Hackney businesses because of the poor economic health of the borough.
“There is a fair amount of postcode disadvantage, some people would say postcode discrimination going on.
“If you are a commercial lender you’re not a charitable organisation, you’re there to make a profit,” he said.
Abbott claimed banks were not being “rabidly anti-Hackney”, but just following a typical lending pattern.
“If a banker gets a proposition from a person in a certain industry they have at their disposal the technology to tell them how those industries do in that postcode area.
“Therefore if they think an area is particularly deprived and the economy isn’t doing particularly well they may not look favourably on certain types of business, it’s as simple as that.
“The banks are smart cookies and they take a lot of account of people’s credit histories.
“Also they are a bit like insurance companies – they weigh the risk very carefully and, just as when you’re trying to get home or car insurance, your postcode is relevant.”
His comments come after a fall in bank lending to UK businesses by £4.3 billion during the last month, an annual decline of 8.1 per cent – the biggest since records began in 1999.
Many Hackney businesses have voiced concerns to HBV Enterprise that they cannot access bank credit, which dried up during the financial crisis.
“You can walk around Hackney and do a straw poll of entrepreneurs and they will tell you it’s tough out there, and some of them will tell you that the banks aren’t lending,” explains Abbott.
Insider information
Arguing that banks are still lending, Abbott said entrepreneurs and business heads need to “know the system” and have a viable business plan to access loans.
“Lots of people go into business and they are not business professionals.
“They might be very passionate, skilled or knowledgeable about what they do, but if they weren’t taught that at school or college or university why should they automatically just know it?
“We know why people can’t get finance. It’s a tough message that not all entrepreneurs want to hear, and it’s about whether or not the entrepreneur demonstrates viability.”
In the last year HBV Enterprise has seen a slight drop in enquiries from companies asking for help, largely due to the lack of start-ups during the recession.
It annually handles around 5,000 enquiries from local firms. It has also helped Hackney businesses gain access to £10 million in financing in just under a decade.
Abbott hopes the new £300,000 Hackney Enterprise Network, launched last month and funded by the council and European Union, will benefit over a hundred local businesses by pooling expertise and training.
He added: “I’d say broadly that times are tough, but the times aren’t tough for the smart ones who are broadening their horizons and they are saying ‘OK I can’t stand still, I have to think differently, how do I run my business in a different way? How might I market and sell myself more effectively?”
Brian Mairs, from the British Bankers Association, claimed that banks looked more at the sector of small businesses, rather than geography, when choosing who they lend to.
“Banks extend loans to small businesses on the expectation that business will repay them. They will be looking at all sorts of things about the business, their capital position, how it will repay, how much it wants to borrow and also they will be looking at more amorphous qualities such as the character of the business.”
