Speaking at the Federation of Small Businesses (FSB) 40th anniversary conference, the Chancellor announced how proposals published today (Friday 28 March) aim to make it easier for SMEs to find alternative loan providers.
The consultation asks whether the government should legislate to require lenders to release information on SMEs they reject for finance, so that they can be identified and approached by alternate credit providers.
The ultimate aim is for new online platforms to be created so that lenders can find SMEs that are looking for a loan, but have been rejected first time around.
Over half of SMEs seeking finance for the first time get rejected, and research suggests most of them do not try again.
Big banks account for the vast majority of main SME banking relationships (over 80%), but innovative new forms of credit, such as peer-to-peer lending and crowd-funding platforms, are being created in the UK all the time.
The proposals will bridge the gap between SMEs not knowing other lending options could meet their needs, and alternative lenders not knowing these businesses need a loan.
Chancellor of the Exchequer, George Osborne said;
The success of small and medium sized business is key to the government’s long term economic plan. That’s why we are fully focused on making sure businesses can get the finance they need to grow and create jobs. This includes actively supporting innovative new forms of business lending.
We’re setting out new proposals that will help match up other lenders with small businesses that may have been turned down for a loan by a large bank. A big bank saying ‘no’ should not be the end of the line for a small business. Now, with our plan, it won’t be.
Business Secretary Vince Cable said;
Too many businesses are put off looking for finance if they are turned down by their bank. By putting the onus on banks to refer these businesses to other sources of finance, we can help make sure the potential of the country’s small businesses isn’t lost. A better referrals system will be good for competition, and good for the economy.
Photo courtesy of Images Money, used under Creative Commons.