Banks Forced to Help Rejected Small Businesses Find Alternative Finance Providers
George Osborne announces new legislation which will increase competition in lending market and facilitate small business growth
Newly approved government legislation means leading banks are now required to share the details of rejected firms so they can be approached by alternative lenders.
Chancellor George Osborne announced that the government will go ahead with legislation (which will come into force in the autumn) that will force banks to forward the details of small and mid-sized businesses they reject for finance to platforms that will connect them to alternative finance providers.
The legislation is part of the Small Business, Enterprise and Employment Bill and is in accordance with the government’s overall strategy to increase competition in the lending market and ensure further growth in the small and mid-sized business community.
Currently the four largest banks (RBS, Lloyds, HSBC and Barclays) account for over 80% of small and mid-sized business investment, and more than half of small firms get rejected on their first attempt to obtain bank funding with many businesses failing to try again.
Despite a dramatic increase in the number of alternative finance providers, a lack of awareness or knowledge of the options available has been cited as a concern in the small business community. The government are hoping the legislation will help remove this barrier.
Osborne emphasised the importance of small and mid-sized business growth:
“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.”