EU proposals could reduce small firms’ access to credit

EU proposals could reduce small firms’ access to credit


EU Commission proposals to remove the obligation for small companies to file annual accounts at Companies House could restrict small firms’ access to credit, according to commercial credit agency Graydon UK.

Under the proposed legislation, companies with a turnover of under €500,000 (£463,000) and fewer than 10 employees would be excused from filing accounts at Companies House. According to the EU Commission, the move would save firms approximately £1,100 a year in administration costs.

However, Graydon UK has criticised the proposals, saying that removing annual accounts filing would make it difficult for banks and credit insurers to assess the viability of companies, and could mean the availability of credit dries up.

“Lenders and insurers are thinking harder than ever before about the risks they take on small firms,” said Graydon UK managing director, Martin Williams. “Taking away access to vital statutory account information will serve to achieve nothing other than to heighten the current state of uncertainty and reduce the availability of both credit and credit insurance.”

The Institute of Credit Management also warned against the move, arguing the legislation would bring little benefit.

“Reducing the amount of accounting information available simply negates the opportunity to make reasoned and informed credit decisions, and in turn stifles business,” said ICM director general Philip King.

But according to the Federation of Small Businesses, any plan to reduce the burden of red tape on small firms was a positive step. 

“Good small businesses wishing to access credit will already have a business plan and will be able to show their accounts are up to date, so they do not need to have their accounts registered with Companies House to be able to demonstrate their viability,” said FSB national chairman John Wright. “We would like to see the Government accept the plan as soon as possible.”

The proposals are currently being reviewed for approval by the European Parliament and Council of Ministers, although no timeline has yet been confirmed.

If you’re worried about credit for your company then be sure to look at the business finance & money section where you can read about everything from government grants to enterprise finance guarantee.

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