High street firms should not fear a ‘kneejerk’ reaction from banks restricting lending in the wake of high-profile firm failures, according to a big-four bank.
The collapse of Manchester firm Cobbetts in January, which followed the demise in 2010 of regional giant Halliwells, has led to acute concerns over the availability of credit.
But Chris Marston, head of professional practices at Lloyds TSB, told the Gazette: ‘There will be no kneejerk reaction from banks, nor would that be appropriate.’
He said firms can ‘take comfort’ from the fact banks will not change their approach to lending to the legal sector due to one-off high-profile collapses, but will consider a range of factors.
Marston said the bank views solicitors as being of high integrity and the instances where it has written off law firm debt have been low compared with other sectors. ‘The partnership model has been a factor, as partners are jointly and severally personally liable,’ he said.
Lloyds TSB, said Marston, has credit policies for all important sectors, including legal, which are reviewed twice a year. The next review for solicitors’ firms will be in around four months.
The bank considers a number of factors, including how its book is performing and whether there are loans that are not being serviced, as well as external factors affecting the sector, such as alternative business structures.
‘We look at trends, not single instances,’ he added.
Despite the economic climate and potential for increased competition from certain ABSs, he said the bank has seen a ‘surprising’ number of start-ups.