New law to force banks to help SMEs find funding
The government has committed to introducing new legislation forcing UK banks who are unable to offer SMEs financial support provide assistance to help them find alternative funding.
The new law is included in the Small Business, Enterprise and Employment Bill, which is currently before parliament, and is supported by £100 million in addition government funding allocated to the British Business Bank’s state-owned investment programme.
Under the new legislation, if a bank turns down a loan application from an SME it will have to ask them whether they would like their information passed on to online platforms, to try and match them up with suitable funding sources.
Alternative sources of finance could include smaller banks, crowdfunders and fintech investors, peer-to-peer lenders and invoice finance providers.
Vince Cable, Business Secretary said: “Forcing banks to refer businesses to alternative lenders is something I’ve been determined to make happen. It’s good that more SMEs are making use of alternative finance but the big banks still dominate and small businesses often give up if they’re turned down for finance by their bank.”
“The UK needs a diverse and competitive business finance market like Germany and the US if our SMEs are to thrive, and that is why the Business Bank is so important. Money is already reaching small businesses, but my ambition for the Business Bank is to radically alter the overall market landscape.”
Source - Harris Lipman