Responding to SME financing shortfalls and lack of support from the banking sector, the government has launched a four-week consultation to gauge feedback on how to help match SMEs that have been rejected for loans by high street lenders
The aim is to improve SME links with challenger banks such as Metro Bank, as well as alternative finance providers to increase the funding available, and responses will be reviewed by the Department for Business, Innovation and Skills (BIS).
Speaking at the Federation of Small Businesses (FSB) 40th anniversary conference, the Chancellor George Osborne said the government was considering legislation which would require lenders to release information on SMEs they reject for finance, so that they can be identified and approached by alternate credit providers.
The consultation, SME finance: help to match SMEs rejected for finance with alternative lenders, is asking for views on the mechanics of delivering such a measure if the government decided to legislate.
It sets out the government’s preferred approach of requiring banks to refer details of SMEs that have been rejected for loans to a platform or platforms so that they can be accessed by challenger banks and other providers of finance.
Osborne said: ‘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.’
He highlighted research which shows that big banks account for over 80% of SME banking relationships, but that over half of SMEs seeking finance for the first time get rejected and most of them do not try again.
The consultation closes on 25 April. Full details are available here: https://www.gov.uk/government/consultations/sme-finance-help-to-match-smes-rejected-for-finance-with-alternative-lenders/sme-finance-help-to-match-smes-rejected-for-finance-with-alternative-lenders
