Small businesses are expected to benefit from improved access to finance as a result of the Small Business Enterprise and Employment Act, which received Royal Assent last week.
Whilst the wide-ranging small business act covers everything from zero-hours contracts to director qualifications, one of the core components deals with the availability of finance for SMEs and start-ups. Under this new legislation, 10 of the UK’s largest lenders will be required to refer the details of any SME whose loan application is denied, with the SMEs permission, to an online platform that can help match them with alternative finance providers.
The 10 financial institutions required to provide referrals under the scheme are: RBS, Barclays, Lloyds Banking Group, HSBC, Santander, Clydesdale Bank, Yorkshire Bank, Bank of Ireland, Allied Irish Bank and Danske Bank.
This legislation will open up access to small business credit data held by the ‘big banks’, which the government said would make it easier for a small business to seek a loan from a lender other than their bank.
The scheme is being administered by the British Business Bank, which has called for Expressions of Interest from alternative finance providers wishing to take part in the referral system.
The Chief Executive of the British Business Bank said: “Smaller businesses will have a greater choice of providers and chance of securing finance, alternative finance providers will have access to a bigger market of potential clients, and the major banks will be able to offer an additional service to those they initially turn down.”
The Business Minister, Matthew Hancock, stated that “The Small Business Act is the first set of laws specifically to help level the playing field for small business. There really has never been a better time to start and grow a business in the UK.”
Additional measures in the act include increasing the support available from UK Export Finance; imposing a new reporting standard on payment practices and policies on the UK’s largest companies; introducing a target for red-tape reduction to be published in each parliamentary term; appointing an independent Small Business Appeals Champion; streamlining insolvency law; and strengthening the rules on director disqualifications.
Business Secretary Vince Cable said, “Small businesses provide jobs for millions of people across the country and are driving the economic recovery. The Small Business Act will create the right environment for small businesses to continue to thrive by giving them greater access to finance to help them innovate and grow, and to also make it easier for them to export goods and service made in Britain.”