Vilified after the financial crisis a decade ago, with its reputation shredded for the way that it asset-stripped small businesses passed over to its notorious Global Restructuring Group, RBS/NatWest has had to claw back its reputation.
GRG was ostensibly a “turnaround” unit to help to return thousands of distressed companies to financial health. However, a review by the Financial Conduct Authority found that it had focused on extracting income from them. Many small business owners blame the RBS arm for damaging or destroying their livelihoods.
A reputation which took generations of canny Scottish bankers to achieve quickly evaporated.
Since then, RBS has split its business banking arms into three geographical brands: NatWest for England and Wales, RBS for Scotland and Ulster Bank for Northern Ireland.
The core proposition for NatWest, RBS and Ulster Bank is the same: each offers locally based business relationship managers supported by digital and telephony services.
NatWest offers what it calls entrepreneur accelerator hubs across England and Wales to support businesses, including hubs based in Cardiff, Birmingham, Bristol and Milton Keynes. These free-to-use workspaces are aimed at companies that want to establish themselves or network. Their reason for being is to help founders understand issues such as resilience and growth strategy. Around 10,000 small businesses have passed through the accelerator programme.
Meanwhile, NatWest/RBS also have what it calls business growth enablers in 70-80 communities across the UK. These are individual bank staff who bring local businesses together through putting on free events such as talks on HR, tax, digital marketing or growth strategy.
NatWest also has a bouquet of services including Esme Loans, its digital lending proposition targeted at SMEs; Rapid Cash, an invoice-finance working capital product; FreeAgent, a digital cloud accountancy service; and its recently announced e-commerce and point of sale payments service Tyl.
Esme recently announced it had crossed a £50m milestone of lending to UK SMEs, following 337pc growth in lending between 2017 and 2018.
Today, NatWest has around 800-900,000 customers including clubs and societies, with turnover of anything up to £2m per annum.
Growth Business sat down with Paul Thwaite, managing director for specialist businesses and business banking at NatWest, to discuss the bank’s offer to entrepreneurs.
Why should I come and see NatWest as opposed to another high-street bank?
Our secret sauce is that we have the biggest group of relationship managers in the UK with the biggest footprint. We have great digital and direct services. We can support you through our business growth enablers or our accelerator hubs. We offer free cloud accountancy and an unparalleled breadth of product range whether you want working capital.
Overall, it’s a range of services beyond banking that allow the business owner to concentrate on the business.
What’s the NatWest ethos when it comes to small business?
Whenever we talk to business banking customers, they want to spend time on their own business doing the things they need to do – that’s their priority. What they don’t want is to spend time on business administration or doing research on how to support the business. Our philosophy is to make it as frictionless as possible to provide the broadest range of services. If they prefer to things face-to-face, that’s absolutely fine; if they want to use a mobile app, that’s fine too. We let them focus on their business while we either help them grow or keep their business safe.
Is there a minimum of level of turnover before I am given a relationship manager?
Usually we need to see about £500,000 turnover for a face-to-face relationship manager. We offer relationship management over the phone if you’re below £500k.
Can I apply for a business loan online without speaking to anybody?
You can apply for a loan through our core NatWest brand or through our Esme brand.
It’s a commonly held view that customers approach the bank, but more often than not our relationship managers speak to customers. They’re not based in branches. They spend their time visiting customers’ premises.
In the business banking space, there’s only a certain percentage who want to borrow; not all customers want a loan.
‘Disruption has put a challenge down to us incumbent banks’
How long does it take for an online loan to be approved?
The market has changed around customer expectations as how long they can expect to wait for a decision, and how quickly they can expect to get the funds. For Esme, it’s as fast as within 29 minutes but usually we aim to be within 24 hours. For our NatWest brand, the majority of our customers can get access to those funds within 48 hours.
The whole lending experience has sped up over the last three to four years, partly because of market disruption by new providers. That’s a great outcome for customers and puts a challenge down to us incumbents.
Is Esme your response to the boom in alternative digital SME finance?
I would say it’s “a” response. We have transformed our core NatWest business banking proposition over the past three years. We’ve made services available digitally and speeded up our response times.
Those customers expect for their business banking services the same level of service they get for their personal accounts. Their expectations have changed along with the competitive environment.
How is Esme different to NatWest?
It’s digital end-to-end using artificial intelligence to assess the credit worthiness of the customer. A fintech partner sits behind that. Esme is aimed at customers who don’t have as many assets as core-brand customers, with a higher loan-to-value ratio, and people who are happy to access digitally.
How much can I borrow through Esme?
Up to £150,000 over one-to-five years, whereas in our core channels we would lend up to £500,000. Your company has to have minimum turnover of £15,000 and all our Esme loans are unsecured.
Whenever small business come to you, have you identified common problems facing UK SMEs?
Mostly they’re looking for support and information, guidance and advice. The most common questions we see are about the day-to-day running a business: How do I set my business up? How do I run it? Other common questions include where to find an accountant or how to register for VAT or register my company name. Most business owners are passionate about the goods or service they provide; it’s a question of how they wrap things around it.
What are common problems affecting SMEs overall?
Obviously, the economic environment and the political uncertainty specific to where we are today.
More generally, how to scale and how to grow your business. Understanding how to scale your business is something that business owners are keen to get advice on.
‘Our response is to embrace that innovation’
How worried is NatWest about disruption from alternative lenders?
There is no doubt that you’ve had two big changes happen: customer expectations and behaviours have changed post the financial crisis, and there have been a number of fintechs entering the market. We think that’s good because it provides broader services.
There’s nothing to stop large incumbent banks from being innovative, whether that’s through partnering with fintechs. Our response is to embrace that innovation.
Do we observe that new participants are winning customers? Absolutely. Have we responded? Again, absolutely.
Do you worry that the new SME alternative finance market is overheating?
There are different business models around those P2P lenders. Some of those companies haven’t been through a full credit cycle yet, and obviously there’s a question mark as to how those companies will perform if there is a downturn.
What happens if I borrow money and I get into trouble? In recent history, RBS earned a dreadful reputation for dismantling distressed businesses.
In the past, mistakes were made. The bank of today is very different.
As part of extended work with the regulator, we have a clear and transparent approach with customers. We have a specialist area called Restructuring that ensures consistency of approach and practice.
What percentage of distressed businesses in Restructuring get passed back to the main bank?
I don’t have the actual figure to hand but it’s a significant number.