At a meeting last week with one of Britain's biggest banks, its head of small business services bemoaned the lack of understanding about the paper-thin margins he was earning on his lending book. What people didn't realise when complaining about access to credit, he explained to me, was that it only takes one in every 100 loans to turn bad for his small and medium-enterprise (SME) lending business to slip into the red.
If that's genuinely the case, the banks should have been cursing their own sales staff for flogging duff interest-rate hedging products long before Friday's announcement that regulators have finally decided to act in a mis-selling scandal about which those close to SMEs, including The Independent, have been warning for some time.
It is already clear this is a scandal that has proved fatal for many small firms. SMEs that would otherwise have been viable have been driven out of business by the high cost of financial products which were originally sold to them as insurance policies it would be prudent to buy. It is difficult to see how the banks can possibly repair the damage in such cases, however strict the line that regulators now take.
For SMEs that have managed to stay afloat, however, there is now a glimmer of light at the end of what has been a long, dark tunnel (the Financial Services Authority's insistence on Friday that unscrupulous sales practices are only now being uncovered suggests the regulator has had its eyes shut for the past two and a half years). But it will be some time before they can emerge completely into the light.
For one thing, there is no moratorium as yet on payments due on loans caught up in the scandal. Businesses will have to go on servicing these loans while their cases are considered – though the banks are now at least promising not to foreclose on affected customers, other than in exceptional circumstances, whatever that means.
For another, the process of redress varies according to the type of interest-rate product an SME was sold.
Those with "structured-collar" plans, the most complicated of the arrangements, will automatically have their cases reviewed. But SMEs with other types of product may have to lobby their bank for an investigation, and there is no guarantee of redress.
Nor is it yet clear what form redress, where it is achieved, will take. Independent banking analysts put the potential cost of the scandal to banks above £1bn, but there is precious little detail on how compensation might be calculated.
Finally, Friday's announcement only concerns the "Big Four" high-street banks – SMEs sold interest-rate protection deals by other lenders and advisers must now wait for the next stage of the FSA's investigation.
The wheels of justice grind very slowly in the financial services industry. This has been a scandal in which many SMEs have been reluctant to complain, for fear of jeopardising the lending arrangements they have agreed with their banks.
The Financial Services Authority's involvement and the promises from the banks extracted by the regulator should lift some of those fears, but that will lead to a rise in the number of cases – and cause additional delays.
Resolving this scandal could prove even more messy than the mis-selling affairs that have affected individuals.SMEs do not have an automatic right to have complaints considered by the Financial Ombudsman Scheme – many are too large to be eligible for the scheme – and there will be more court cases.
In the meantime, it's far from certain that there won't be more business failures as a direct result of bank mis-selling.
Aim on course for its worst year of fund raising
At the half-year point, it's possible the Alternative Investment Market will endure its poorest year for fund raisings and initial public offerings since its inception in 1995.
Though funds raised this year will now almost certainly outstrip what was achieved in the leanest years of the Nineties, the number of companies listing will be significantly lower unless there is a flurry of deals during in the second half of the year.
One crumb of comfort is provided by new analysis from Allenby Capital, the Aim-focused broker.
In a study of 16 companies which joined Aim before the end of May, it says that in such a difficult environment for new listings, newcomers have generally had no choice but to value themselves conservatively. As a result, post-flotation performance has often been good.
"Aim IPOs appear to be priced more realistically," said Matt Butlin, head of equities at Allenby.
"In a weak market, 10 of the 16 are trading in line or above their issue price and the average return of all 16 [has been] 21.1 per cent."
Tablet specialist plots global expansion
One business that is going ahead with an Aim flotation is Kada Technology Holdings, which will announce its intention for an initial public offering today. Kada expects to complete the listing before the end of the month and to be valued at around £100m following the float.
The business, which made a $13m pre-tax profit on sales of $82m last year, essentially has two strands to it. It comes up with business designs and sells components for devices such as netbooks and tablet computers, while its distributor operation sources other suppliers' components and sells them on. The company is keen to boost the first of these businesses, with a particular focus on wireless media.
Based in Shenzhen, China, Kada has so far sought to capitalise on the fast-growing local market for electronic devices, but now has high hopes for international development. It has offices in Malaysia and Kuala Lumpur and is plotting expansion across South-east Asia.
Small business woman of the week: Sarah Holmes, co-director, Merrythought
"Merrythought is in its fourth generation of family management – it was established by my great-grandfather in 1930 as an attempt to diversify the family yarn-spinning business, and my sister Hannah and I took over last year.
"We still make high-quality, mohair teddy bears in the traditional way in the same factory in Ironbridge, and we're the last soft toy manufacturer in Britain.
"We won the contract to produce the official teddy bears for the London Olympics, which we're really proud about. But our primary motivation with the 2012 project was to promote our brand and build awareness – we're by far the smallest of the official licensees and one of very few licensees to be actually manufacturing our products in Britain.
"In the 1950s we were a mass-market manufacturer, but my father recognised in the Eighties and Nineties that the only way to cope with competition from the Far East was to become a producer of high-end goods, particularly for the collectibles market which can sustain higher price points.
"Competition is still tough, but we are seeing some recognition of British goods as high quality – both domestically and internationally.Reuse content