Asian businesses face tough times in credit-hit UKOctober 19th, 2008 - 2:54 pm ICT by IANS
London, Oct 19 (IANS) Tina Sawhney, an Indian-born British businesswoman who owns flats she gives out to rent, has been told by her bank to repay the loan given to her by this year-end. During the interim period she has either to get another mortgage or face repossession of her flats by the bank in case on nonpayment.Her loan of £160,000 is secured on a building valued at £690,000 last year. “I have a long track record with the bank, I’ve owned the building since 1991 and I’ve never missed a single mortgage payment. The manager told me I was a great customer but that the bank had taken a commercial decision not to do this.”
Sawhney is not too sure of getting a new mortgage. “I keep bursting into tears about it. It’s heartbreaking to think about the possibility of being repossessed. My tenants will be on the streets if this happens.”
Restaurateur Asad Khan finds himself similarly left in the lurch. He owns two Indian restaurants and his bank agreed to finance him £280,000 for a third site for his chain called India Dining. He even signed contracts with his bank. However, the bank backed out at the last minute.
He said: “They started asking us to show them we could service the loan. We showed them the profitability of the other two restaurants but they told us they no longer wanted to support projection-led lending. They were treating the lending on the new premises as start-up funding even though we had a track record of growth and profitability.”
Khan has now taken a bridge loan at a heavy interest and is looking for a private investor to enable him to pay back the bridging loan and continue his expansion.
The Times on Sunday has highlighted the cases of two Indian-born businessmen to illustrate the dire straits the latter find themselves in. The government has assured to step in to save small Asian businesses from ruin with the crunch-hit British banks demanding their loaned money back and refusing new loans.
Reeling under the credit crunch, many banks are either cancelling loans extended to small businessmen, backing out of new loans or reducing overdraft facilities.
William Flatau, owner of the commercial finance brokerage First Finance, is not optimistic about the outlook for small firms that need cash. In many cases the banks are not telling businesses in distress that they are pulling their support.
“Instead they are stealthily reducing their overdrafts. If a company gets a big payment of £30,000 in, they will reduce the overdraft facility from £ 50,000 to £20,000. Practices are getting quite a bit sharper in this environment.”
In response to the funding crisis, the minister for competitiveness and small business, Baroness Shriti Vadera, is quoted by The Times on Sunday as saying that she will help restore lending to small firms and to make government departments, local authorities and the NHS pay smaller suppliers promptly.
The Baroness said: “Across the government, this department and the national economic committee, we are very focused on this issue. We understand what these companies are going through and we are doing everything we can to help.”