Don't bank on it
It’s no secret that some small businesses find it hard to get help from the banks. Jenny Burnside talks to entrepreneur Darren Hall about some of the challenges that he faced
In times of economic gloom, rays of light appear less frequently. Fewer still, are those that appear in the form of plucky antipodean entrepreneurs with innovative business ideas, a bank of experience, and ready cash, choosing Northern Ireland to base their new internet venture, over and above a wealth of other worldwide options.
Willing to invest and ready to employ staff, Darren Hall is the former Chief Executive of a technology company based in China. Fed up of 100 hour weeks, with a young family he wanted to spend more time with and friends that spoke highly of their home in Northern Ireland, Hall bravely upped sticks and has moved halfway across the world to start www.ibiditrade.com, which launched on August 19.
Ibiditrade is a little bit different too. Part eBay, part Amazon, part Hall's own, it cleverly combines different aspects and introduces new ones to the online trading platforms that are popular the world over. It is also tailored to the current difficult trading and retail environment.
“Entertainment shopping is a niche online eCommerce industry based around live real time auctions where users bid in pennies [one cent at a time],” Hall explains. “Each user prepays for a ‘bid package' of say £10 for 20 bids, with bids costing 50p each, then they bid on auctions where the price increases by one penny at a time. At the end of the auction, when the clock has reached zero and assuming no more bids reset the auction clock, the final bid is a winner.”
This means the winner can purchase high-value products at well below market price. They can then keep their prize, cash it in, or resell it on the site. Users also generate commission by referring friends.
In short, Hall is exactly the sort of creative, experienced businessman Northern Ireland should be welcoming with open arms.
A former business banker with more than $400,000 in a US bank account, Hall was prepared for questions and armed with identification and accounts for his first bank visit as he sought to set up a business account in addition to his personal account, in the United Kingdom. To be clear, Hall was merely seeking a bank in which to base his account, he didn't need a loan, have credit card debt and wasn't seeking any capital investment.
“To our amazement, we were given the following responses,” Hall remembers. “One: we need a reference from our lawyer or accountant who has known us in the UK for more than two years (bear in mind we are not from the UK); Two: Come back in six months when you have been trading and we will help; Three: Business financial accounts for the last 12 months? Four: One bank even responded by saying our company name was wrong and we didn't own the shares,” Hall exclaimed.
“The worst was the bank in the UK where I have my personal account, I had substantial funds in my account and had already invested over £100,000 on the business [able to prove it with receipts and other records] and they wanted the business to be up and running for six months first before they would open a business account,” adds Hall. More shocking still, is the Northern Ireland bank which advised Hall to move the business offshore, open an offshore bank account and hire people outside the UK to save time and money. Actions that would represent a missed opportunity for potential NI employees and tax revenue.
Determined, thankfully Hall persevered. “I did not want to move everything offshore having had four full-time staff in the UK and two part-time staff in the UK since May 2011.” Over the next six months, Hall expects to hire more staff based in Northern Ireland. “I believe the UK is a good place to be and do business, and we have recently been able to open an account with a bank that we think is progressive and supportive of our business and plans,” says Hall.
Roger Pollen, Head of External Affairs at the Federation for Small Businesses commented that the FSB were working hard on the banking issues affecting smaller businesses, in addition to the better publicised issues around lending. “Other related issues raised by our members have included the withdrawal of overdraft facilities or their being converted to loans with no notice or discussion. As well as this, exorbitant charges and unfavourable changes to business account terms and conditions are also being highlighted. This climate and these relationships must change if we are to see the financial flexibility needed to support recovery of the local economy.”
Hall says his experience sustains the notion that small businesses — the backbone of the economy — are not what banks want to be dealing with, especially when they don't require any loans. Hall believes improvements could be made if the banks were to work more closely with innovation partners, like Invest NI for example. “I think that improvements could be made by banks partnering with innovation centres, business mentoring services and local support services where by all taking part in supporting the start up business, this helps overcome the issues quickly and may lead to greater success for the business which in turn would mean employing more people and paying more taxes — the very things needed by any country, not just the UK.
“There is a lot of distrust of bankers and banks globally for good reason. Most had the support of taxpayers’ money and yet they retain an air of arrogance. One must temper that with the fact that not all are the same and there are many good people within banking, but the overall impression is bad,” says Hall.
Thankfully, despite his battle with the banks, Hall is undeterred about remaining based in Northern Ireland. “The people here are wonderfully welcoming and supportive. My church pastor gave me more advice than the bank gave me,” Hall observes.
Hall's level of determination to succeed is a robust breath of fresh air in the midst of a slow and fragile recovery. More seriously, he represents a ray of light that creative professionals are still willing to start a business here.