Lloyds leave a sour taste for Worrall Thompson

The celebrity chef Antony Worrall Thomson was forced to call in the administrators to his restaurants recently, after Lloyds declined to extend their borrowing. Apparantly, the recession means that more and more of us are choosing to eat in rather than head to a restaurant.

AWT as he shall be referred to put the blame firmly at the banks door, and criticised them for not backing him when the chips were down. However if you read his statement then something should stand out as rather odd. He said

"We needed looking after for the first four months of the year and the banks just didn't want to play, not without me giving horrendous personal guarantees that I wasn't prepared to do" 

So the thing is, it appears that the bank did actually agree to lend him the money based on the business plan that he had put forward. What they had asked for however, is that he offered a personal guarantee on the loan. This meant that if the business subsequently failed, then he would be liable to cough up to the bank.

Banks have been criticised for both lending money, and not lending money, in equal measures recently and there is a smidgen, (just a smidgen) of sympathy with their predicament. If they lend money and it goes bad, then they get it in the neck for irresponsible lending, and if they dont lend, then they are charged with hoarding money and putting small firms out of business.

In this situation however it would look like the restaurants had been underperforming for a while and needed a major restructring in order to survive. Fair play, it appears as though they had a robust plan in place to turn it around, but needed a major cash injection. It could be imagined the conversation went something like

Bank - 'Okay we have reviewed your figures and the business is failing at the moment'

AWT - 'Erm yes, but we have a plan'

Bank - 'Great, so what is the plan'

AWT - 'Well if you can lend us £200,000 then we think that will give us enough time to turn it around'

Bank - 'Okay, and do you believe that you can turn it around'

AWT - 'Absolutely'

Bank - 'OK well if we stump up the money, we would like you to offer a guarantee that if you fail then you will cover our losses'

AWT - 'Erm no, I don't want to do that, the business might fail'

Bank - 'But you just said that you absolutely believed you could turn it around'

AWT - 'Erm yes, but I dont want to take the risk'

Bank - 'But you would like us to take the risk?, even when you are doubtful that your plan will work'

AWT - 'That was my thought process, yes.'

Bank - 'Oh'

Ask yourself honestly whether you would have lent the money and moreso, what you would have thought about a bank that did and susequently got burnt.  If you ever watch Dragons Den then you will know that the one thing guaranteed to irritate the Dragons is someone asking for an investment in something that they don't believe in enough, to put their own money on the line.