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Last Updated: Thursday, 16 December, 2004, 00:07 GMT
Looking for a more supportive bank
A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain  - Robert Frost, American poet
Does your bank want its umbrella back as soon as it starts raining?

Having an understanding and supportive bank is vital for any small business.

But what can you do when the relationship goes seriously wrong?

QUESTION
Iain MacLellan, Scotland
I own a hotel on a Scottish island.

We rely heavily upon tourism, although local trade keeps things ticking over during the winter.

The hotel has been in my family for more than 100 years.

My local bank has provided me with business banking since I bought the hotel from my father 25 years ago.

Since then my annual turnover has steadily increased and last year it reached more than 300,000.

The bank staff now almost sneer at me when I go into the branch.

The hotel is one of the most successful on the island and last year's accounts were very healthy - profit increased to 40,000.

However, I have had problems with my finances over the past seven years, as my son was diagnosed with severe autism and my wife and I embarked on expensive intervention therapy for him.

We have spent 200,000 over the past seven years and had to sell two houses we bought when profits were good.

As a result, my bank is unwilling to support me any more.

I now need to take my son to New York to see a consultant, but the bank won't give me any financial assistance with this whatsoever.

I have defaulted on payments to creditors and my credit rating is poor because the the bank is returning cheques, not helping me meet payments to beer suppliers and so on.

The bank staff now almost sneer at me when I go into the branch.

Can I move to a different bank for business banking despite my poor credit record? Which bank would be most interested in someone like me?

I live on an island with a population 3,500 and just two resident banks. Any advice would be much appreciated.

ANSWER
Peter Ferns, director of NatWest Business Banking
Your situation is difficult and it is hard, without further information, to advise you on the best course of action to take.

Your son's treatment is clearly weighing heavily on your business and causing you a lot of financial uncertainty.

Nevertheless, you - as any parent would - have deemed the health of your son your most important commitment.

Firstly, I would see what support is available to you from the government. Are there grants available or even financial support for your child's medical treatment?

That said, however, I can appreciate that any help is unlikely to cover the full cost and that you are going to have to pull on other resources to pay for it.

You mention that you have more than 600,000 of assets, although you do not mention if you have mortgages on your home or your hotel.

If not, it may be worth considering if you can afford to free up any equity from your home to repay your outstanding borrowing with the bank.

Before remortgaging, though, you must consider if you can afford the repayments in the long term. It is advisable to try to separate your business and personal expenditure wherever possible.

You obviously feel uncertain about your relationship with your current bankers. May I suggest, as a matter of urgency, that you contact them to arrange a face-to-face meeting with your relationship manager to discuss your situation.

Failing that, it would be worth meeting with other banks to discuss your requirements. Once they can gather more details on your situation, for example your trading figures and personal expenditure, they will be able to come up with more in-depth solutions for you.


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