Legislation has been drafted, which includes help for smaller businesses to find alternative lenders if they are refused by big banks and traditional access routes to finance.
The Government has published draft legislation that introduces new measure to support SMEs in seeking the vital finance that they need to develop. This legislation, introduced through the Small Business Enterprise and Employment Bill, introduces measures to help smaller businesses by requiring that banks that have refused them load must offer these businesses the option to have their key information passed on to platforms, approved by the governement, that can match them with alternative lenders.
More than 50% of SMEs seeking first time finance are refused, with further research suggesting that many do not try again.
However, the government has stated that SMEs are absolutely vital to the UK’s economy, accounting for over half of private sector employment and approximately 50% of all private sector turnover. Therefore, the government has stepped in to enable SMEs to find the finance and the funding investment that supports the growth and job creation of these businesses.
With larger banks accounting for over 80% of SME banking relationships, the government is trying to encourage new lines of credit through such innovations as peer-to-peer lending and crowd-funding solutions for UK business.
These new measure will serve SMEs by helping them find lending options that more appropriately match their specific requirements and funding models that best support their specific growth plans.
The Economic Secretary to the Treasury Andrea Leadsom said:
“A key part of our long term economic plan is to ensure that small businesses are able to access the finance they need to grow and succeed.
“The best way to deliver this is to increase competition in the sector and remove the barriers to new sources of finance for SMEs.
“That is why the legislation we’re introducing today is so important, as it will help ensure businesses that want to borrow, and lenders that are ready to lend, can easily find one another.”
The Small Business Enterprise and Employment Bill is expected to come into force in early 2015.
Words: Peter Cribley