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Beware the one-stop financial shop

A suggestion that companies in the SME sector should take note of trends that are becoming apparent in the larger company sector is made today by one of the champions of small businesses.

Leslie Bland, Chief Executive of Close Invoice Finance, the factoring and invoice discounting arm of Close Brothers merchant bankers, has long propounded the dangers of small businesses having 'all their eggs in one basket'.

He has warned of the consequences of companies entrusting all their financial affairs ­ general banking, overdrafts, cash flow requirements and even insurance - to one source, usually a clearing bank. He now backs his argument with statistics that have emerged since the Enron scandal and the SEC review of how U.S. investment banks have behaved.

Mr Bland points out that not long ago the 'one-stop shops' offered by large investment banks to their corporate clients appeared to be the way forward. Integrated banks were combining the advisory role of corporate finance with large teams of analysts whose principal role was to produce research to encourage investors to buy and sell shares, and therefore generate commissions.

He goes on: "Research suggests that the integrated model is not as all-pervasive or long lasting as the megabank marketing machines would have us believe. A significant proportion of companies have changed their integrated adviser over the past couple of years, suggesting the one-stop shop approach is not a compelling model for satisfying clients' needs."

Mr Bland believes similar thinking should permeate through to the small business sector. "Since the Brumark ruling, small businesses have been under even greater pressure from their banks to move to factoring and invoice discounting funding, but from operations that are themselves part of the major clearing banks where they hold their accounts," he says. "I think businessmen should spread their funding and use a Factor that is totally independent of their clearing bank ­ in fact totally independent of all clearing banks.

"I accept that large companies are a world apart from the SME sector in Britain, but we can't ignore what goes on all round us, and if they are feeling unhappy about situations we should all take heed."


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