The banker's problem: who will take my cash?

If there's one thing my eight year old can tell you about the Credit Crunch (other than her favourite pick'n'mix has vanished) it's the simple fact that bankers stopped lending.

Well I've just met one who swears he hasn't.

Can't tell you who he is yet, it's all very hush hush. But I can quote anonymously: "My problem is finding businesses to take the cash."

Form an orderly queue now, let me introduce you.

This guy works for one of our big banks, and lends to biggish firms in the West Country. He says colleagues working with one man bands have the same problem.

I remind him that in the popular version of the Credit Crunch, the bankers are the bad guys. The ones refusing to lend to healthy firms, or hiking their rates up for no reason.

"Not us", he insists. "We may have put our margins up, but our overall rates have gone down."

On this point he's quite right. Every deal is different, but imagine a widget-maker in Warminster, turning over £30m a year and borrowing from the bank at 1% over base rate. Yes, 1% above the Bank of England's base rate. Fairly common over the past few years, when money was cheap and the competition for lending fierce.

"1% over base is history," my banker tells me. Those days probably always were madness, and now they've gone. There was a wall of cash which retracted, and left a void," he says. Banks now have to keep much more capital in their reserves, world money markets are much more expensive, and everything is riskier. Which means that deal is now costing our widget-maker 3% above base.

But people should stop looking at the margin, says my man, leaning forward insistently. The actual cost of the money is all that matters. And since the Base Rate has dropped from 5.5% to 0.5%, that new deal is 3.5% - compared with 6.5% two years ago. Yes, the margin has gone up; but the price has gone down.

So what of his claim that every day bankers like him go out hawking their cash to a nation of penny-pinchers who won't take a loan? Well, it's not what I hear from Business Link, from the Federation of Small Businesses, or from companies I talk to. They all say the biggest bugbear is still raising finance.

"There's a real disconnect there," agrees my new money mate. You can say that again. We come up with a few possible reasons, but I'm open to suggestions on this one from you. First, he says people are more nervous about borrowing. If orders are down, you think twice about that fancy piece of German kit the production manager is begging you to buy. So there really are fewer firms asking for money.

And second, it's true that the foreigners have fled. Not the Polish plumbers, but the Icelandic bankers, and the Qatari Investment Funds. In the boom years before 2008 lots of deals were financed by overseas cash. There are much finer analysts of their flight than me, but suffice to say the overseas lenders aren't here any more.

The Bank of England has produced reams of stats that show how our big UK banks have been left holding the financial baby. Lloyds, HSBC, RBS and NatWest, Barclays - the usual names - are now doing the vast bulk of UK commercial lending. So it could be true both that these guys are lending more, and that there's less cash about.

Well, what do you know? This recession gets more and more complex, the web more and more intricate. So if you're borrowing from the banks, tell me what they're like. Is my Big Friendly Banker the only one? Is he spinning me a line? Hit that comments button now....