Sources of finance - the bank overdraft rip-off
We got a letter from the Bank of Scotland last week offering us a very generous bank overdraft for the tutor2u business…
Not that we asked for an overdraft. We’ve had a positive cash balance since day one and I can’t really imagine why we would need a bank overdraft now as part of our financial structure.
Still it was nice to get the offer…until I looked at the rate of interest on offer.
A quick reminder. The Bank of England base rate is 0.5%.
The Bank of Scotland offer for a bank overdraft? Go overdrawn by up to £50,000, on which the interest rate will be 17.5%
That’s 17 percentage points higher than the base rate - for a low-risk, profitable business that has never been in debt. How generous.
It seems we are not alone. The media feature lots of small businesses that are complaining that the fall in the base interest rate has not been followed by a reduction in the overdraft and loan rates charged by the banks. The chart below illustrates that. So much for the banks wanting to do their bit to help corporate Britain pull us out of recession
Join Jim Riley and the tutor2u BUSS4 team for an intensive day designed to prepare students for the challenges of BUSS4 in June 2015. Each of the five workshop sessions introduces and builds effective essay planning and writing technique. We do this in the context of looking at both Manufacturing in the UK (Section A) and core topics for Section B including leadership, change management, technology, strategic choice and globalisation.