The beginning of a new, better chapter?

Originally sent exclusively to The Letter subscribers on July 6th. Want to be the first to get my personal newsletter in your inbox every Monday at 7am? Subscribe for free here.

Weird thing happened this week.

I was in two meetings, both with banks.

One was with my main bank to discuss the year ahead and our plans.

The other was with a funder that has been talking to me about commercial property finance.

I’ve sat through hundreds of these meetings over the years while sailing the seven seas of entrepreneurship.

Raising capital is one of those seas. Optimising it to generate the best return is another.

Getting funding on the best terms, at the most attractive rates, with repayments that work for your business, is what experienced entrepreneurs spend years learning.

That’s nothing new.

I’ve been that captain juggling facilities, negotiating every covenant, explaining why I needed the money and trying to persuade lenders to back our plans.

But this week was different.

Both meetings were… easy and the mood was different to these right fisted money hoarders.

Why?

Because the banks wanted to lend and on more attractive terms.

Bank managers are naturally cautious, but this felt different.

Across the two meetings I sat with seven different people, and the message was remarkably consistent.

The head honchos from 2 different organisations had both given the nod to do business.

They had actually had been encouraged to do more business.

It was like telling a kid they can have 2 desserts. 

Some of the lending covenants were becoming more flexible, and there was a genuine appetite to support growth.

That got me digging. It’s not usual. 

Since the financial crisis in 2008, banks have operated under much stricter capital rules. In simple terms, they have had to hold more capital against the money they lend, making lending more cautious and more expensive and effectively making lending harder.

At the same time, businesses still needed funding.

Business finds a way. 

The result?

A huge rise in private credit, venture capital and alternative lenders stepping in where traditional banks had pulled back.

Much of that lending has taken place in what is often called the “shadow banking” sector. That’s not to say it’s illegal or underhand. It simply means much of the lending happens outside the traditional banking system and isn’t regulated in the same way as high street banks.

Regulators have become increasingly aware that too much lending migrating outside the banking system creates its own risks. They like being nosey Parker’s to stop a re run of 2008.

As a result, we’re now seeing signs that banks are being given more flexibility within the regulatory framework to support lending where it makes sense, while still maintaining the resilience of the financial system.

Banks in both the UK and the US are sitting on substantial customer deposits. If they can prudently lend more of that money into the real economy, that’s good for businesses, investment and growth.

If this trend continues, it could be very good news for entrepreneurs.

The next time you need funding, you may find your bank which is far cheaper than those challengers is more willing to have a sensible conversation than it was a year or two ago.

And for some of the expensive alternative lenders charging eye-watering interest rates, the party could be coming to an end.

I only have my own experience to go on, but after speaking to both lenders and doing a bit of research afterwards, it certainly feels as though the tide is turning.

For entrepreneurs, easier access to sensible, competitively priced capital has always been one of the biggest catalysts for growth.

Let’s hope this is the beginning of that next chapter.

If you’re reading this: you’re the folks that grow the economy so I’m genuinely excited about this. 

In other news. did the person who coined the phrase "one-hit wonder" ever come up with another famous catchphrase?

To your continued success,

James

P.S. Fancy touring my businesses on a big coach around Essex? Save your seat and come behind the curtain to see how my businesses really work.