Tuesday, November 1, 2011

Lessons on disclosure from small business

A Telegraph article on the need for small business to disclose more information in order to secure more and cheaper capital has lessons for even the largest global financial institution.
A Sunday Telegraph report revealed that credit ratings agencies recommend vastly different credit limits to the same businesses – with an average variation of 150pc. 
Experts said one of the causes of the inconsistency is the lack of up-to-date financial information available on small companies. 
Even for large firms, analysts have to guess when there is not up-to-date financial information.

There is no excuse for global financial institutions not to provide current disclosure of their assets, liabilities and off-balance sheet exposures.  This is information that is tracked on a daily basis by their information systems and as a result it would be easy to share.
Writing on the Club’s forum on LinkedIn, Paul Smalley, managing director of Paper Mountain Solutions, said ... “If we are going to address why the banks aren’t lending, we need to take the argument to their door – lack of financial transparency and management information is often a reason for applications being declined.” 
Richard Gilkes, managing director of Stort Chemicals, has spent the last three years 'oversupplying’ the credit ratings agencies with information after his credit limit collapsed from £250,000 to zero overnight in 2008. He said “95pc” of small business owners don’t want to provide up-to-date information and the issue is compounded by a Government drive to reduce the accounting requirements on small companies. 
Mark Jones, an asset finance specialist, said: “If you can’t or won’t provide good, current information the lender will assume you have something to hide or you are not in control of your business.” 

No comments: