Banking On It
With more than a little irony, one of the empty, tired buildings that our group of friends and family bought was a former Bank of Scotland branch. Ironic, because banks have allegedly closed many businesses. The latest scandal is the Royal Bank of Scotland’s “Dash For Cash”. If true, it represent’s a terribly stain of the reputation of RBS: click here to read the BBC report. Further irony as we have found the Royal Bank of Scotland to have the best and most trusted staff at local level. We can attest to the positive aspects of RBS in spite of many challenges they have.
Royal Bank of Scotland: Little Hope That These Managers Can Redeem Themselves
Meet the new boss, same as the old boss? A registered charity we know tried to buy one of the Royal Bank’s closed branches. Current CEO McEwan: not interested! This new RBS bank manager just wants to liquidate property in another RBS asset grab-and-sell. Senior management have no empathy with local communities.
Maybe RBS bosses could learn a thing or two by talking to their branch staff. We know first hand that the Royal Bank of Scotland can be incredibly supportive of new business – it helped us get our Unique Property Bulletin off of the ground: click here. Many of the 24 businesses we have so far helped re-open have been positively helped by RBS.
The Royal Bank can relate to local communities when it is at it’s best: click here. Maybe unfair to focus too much on the one bank. For sure there is a power of hard work for all the major banks to do to rebuild trust in their institutions. The Bank of Scotland is one that we have had a very bad experience with. We are not alone in having dreadful problems at the Bank of Scotland: click here.
So with the echo of the local Bank of Scotland manager’s excuse for failure repertoire ringing in our ears, it was with almost schadenfreude delight we proved him wrong in his multiple failures to support local businesses, and were able to make a vivid point of buying his old, closed bank branch…
The Old Bank Before Our Purchase & Renovation (c) 2005 Russ McLean
A closed bank – empty, unloved and unhelpful. Almost a metaphor for the banking industry! British banks need to start rebuilding relationships with customers, communities and taxpayers.
Many banks were seize-up after the 2007 banking crisis. The bank engine had plenty of public money and quantitative easing oil in the form of billions in cash from the UK taxpayers. But banks are still not helping drive the economy in a sufficiently meaningful way. This is causing serious structural problems in getting Britain back to life again. At all levels whether the small business or the huge public limited company.
Back in 2005 Before the banking crisis of 2007/2008 the banks were not as helpful as they might have been. Since the massive taxpayer bailout, the banks seem to have gotten worse and in the process caused themselves serious reputational damage by scandal after scandal. PFI, LIBOR, Interest Rate Hedging, ForEx Manipulation and much more. All the while preferring to pressure companies and individuals to repay loans so the banks could put this onto their balance sheets.
But there are good banks. We know. The money advice charity we started on 27th March 1997 (here). This registered charity was helped significantly by donations from good banks like HSBC.
Back to the bank building we bought. It was renovated at a time when the property market and economy was in better shape. Though the principles are still sound now we are rebooting these type of empty-business re-opening projects from 2017 onwards.
The Old Bank Back To Life After Renovation (c) 2005 Russ McLean
If a building can be bought WITHOUT bank finance, by pooling resources, then that takes a serious amount of strain off of any project run from within any given building renovation project. With this particular building, it cost very little, and the group of friends were not exactly “betting the bank” on it. Indeed when the arithmetic was finalised, the purchase cost of the building, added to the renovation cost, plus providing a line of credit from our group to the newstart business (the banks wouldn’t even lend to a new business back then) – when all was tallied up, and the building sold as a buy-to-let our books balanced. Indeed there could have been a handsome profit, but our code, then and now, was to run the effort on a break-even basis. The buy-to-let purchaser got a decent building and fair return on his investment. We managed to bring an old bank to life. Three new jobs were created.
A Fine Solid Building – A Good Secure Asset (c) 2005 D. Rutherford
If any bank directors are reading this, they, and perhaps their PR Department could do a lot worse than say lend small groups who renovate empty shops and help folk get started say 50% loan-to-value. Not that people like us are keen to borrow. However the accountants say we could refurbish and reopen twice as many properties with some bank support.
The banks would win too. The quality of their LOAN BOOK would improve. That means a bank lending 50% loan-to-value would have asset backed lending of a high quality. After all it was earlier lending to the domestic market at 95% loan-to-value (and worse) that got us all into this austerity mess.
So how about it? If any other groups up and down the British Isles have a positive experience with a bank lending 50% loan-to-value on projects such as the ones on this website, please let us know. We would be delighted to give a HUGE pat on the back and as much good PR as possible if any bank decides it is in everyone’s interest to start lending again at MODEST levels and on solid asset backed buildings.
This particular project felt very good, but strange. To buy an old bank without any help from any banks, and manage a refurbishment, and re-opening was an interesting experience.
But all in all, there should have been some bank support.
Perhaps now is a good time for banks to start lending to businesses that aim to reopen closed buildings and create new jobs.