Just six weeks ago, ambitious entrepreneurs with a decent track record and a hefty appetite for credit risk were breezing into banks in the City. And when they got there, they tended to get what they wanted: loans on ever more aggressive multiples of earnings. These days, the entrepreneurs who were looking to fund deals at ten times earnings are wondering whether they will be able to get any banks to lend to them at six and a half times.

To many, the anxiety in the credit markets is overdone. But the evidence from Esporta, the UK gym chain that has gone into administration, shows that the devil-may-care lending in the City was out of control too. Just six months after Simon Halabi, the real estate investor, paid £480 million for Esporta, Grant Thornton has been called in as administrator because the company is struggling to meet its debt payments.

Mr Halabi’s purchase of Esporta was seen as crazy at the time. Rival bidders said they simply could not understand how the business was viable, lumbered with so much debt. They said that he had overbid and that it would come back to haunt him.

Mr Halabi seems to have overestimated his management skills as much as he has been overconfident about his maths. Just three months after the deal was completed, the chief executive and the finance director quit. Sales were down 18 per cent last month on a year earlier. The gym is reported to have lost 10,000 members in the past three months.

Mr Halabi’s overexuberance in bidding more than £50 million above any other bidder for Esporta has been shown to be foolish, but it was understandable. People in the throes of competitive auctions can often convince themselves of almost anything.

The real questions in this short, sorry story need to be levelled at SocGen, the bank that provided Mr Halabi with a loan of £330 million to fund the deal.

The bank has done the right thing in bringing in the administrators, when it emerged that Mr Halabi was unlikely to inject more equity. But overbidding, as in the case of Esporta, has only been made possible in the past couple of years because banks such as SocGen have been willing to provide such cheap money.

Deals such as Esporta, and the private equity buyout of Boots, are going to make it much harder for eager entrepreneurs to breeze into the banks in the years to come.

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