Measures designed to pave the way for businesses to get improved access to finance have become law following Royal Assent for the Small Business, Enterprise and Employment Act being given this week but, according to Sacha Bright, the founder and chief executive of the UK's crowdfunding aggregator, BusinessAgent, it is too early for Britain's SMEs to start celebrating.
The law requires banks to pass on details of small and mid-sized businesses that they decline for a loan to online platforms which can help match them with alternative finance providers. This is, of course, with the firm's permission.
Sacha Bright said: "The managing director of the British Business Bank, Andrew Van Der Lehm, admits that there won't be anything in place until sometime in 2016. In his own words: ‘It is better that the system is implemented well than we rush it'. While the desire for quality is fine, this demonstrates an appalling lack of urgency".
"We are in a situation where, according to Government figures, first-time SME borrowers face a 50% rejection rate. Many of these businesses are high growth SMEs operating in a knowledge based economy and the traditional banks are ill-equipped to help them. There are alternatives out there for these businesses, but despite rapid growth in the Alternative Finance market, there is still a significant lack of awareness. This will only be accelerated by effective signposting from the places where businesses still tend to go first - their bank"
According to Nesta, the Alternative Finance market provided £1.2bn to businesses last year and although this represents 214% year-on-year growth, it is still only about 2 per cent of annual UK business lending.
Mr Bright estimates that more than 250,000 businesses could be helped when the legislation is effectively implemented.
Launched by Sacha Bright and his colleagues in November 2014, Businessagent hosts over 40 Crowdfunders and Crowdlenders on its website, including top industry names such as Angels' Den and FundingCircle.
In February this year, Stephen Hazell-Smith, one of the City's leading experts on small companies and a founder of both the AIM and PLUS junior equity markets, was appointed chairman of Businessagent.
Source - press release BusinessAgent