Government Ministers Want Businesses To Be Able To Access Credit More Easily
Government proposals to overhaul the way credit is distributed to SMEs will go through a consultation in 2014, it has been announced.
Officials want to improve the way that small firms get access to finance amid complaints the process is too laborious for many time-strapped businesses who do not have the resources to cope with excessive paperwork.
Under proposals announced by the Treasury, banks will be required to share credit data about SMEs with other financial institutions through reference agencies.
The Office of Fair Trading and the Competition Commission have both highlighted in the past how poor information regarding the creditworthiness of small businesses is harming the UK's economy - with some firms claiming this has caused their growth plans to be shelved in favour of budgetary stagnation.
But the vested interests of banks, which rarely see any advantage in sharing credit reports with competitors, have meant this was not possible until now.
Financial secretary to the Treasury Sajid Javid said: "The government is determined to build a banking system that supports Britain’s economy and its SMEs.
"The best way to deliver this is to increase competition in the sector and remove the barriers to new sources of finance for SMEs. Requiring banks to share data is an important part of creating a more level playing field that will enable more providers to enter the market."
Those involved in the consultation will be asked to give their views on the way the credit industry works by February 17th 2014, before the coalition intends to bring legislation before the next session of Parliament.
SME owners have been buoyed by economic growth figures in recent weeks and months that show the UK is emerging from its protracted spell of stagnation following the global financial crisis.
Government ministers claim their economic management has helped in reductions seen in the base rate of unemployment, but the Labour opposition argues an ongoing "cost of living crisis" is harming the public's finances.
Through our discussions and work with small businesses, we see first-hand the many difficulties they have to contend with on a day-to-day basis. In recent months and years, a key challenge for smaller firms has been access to finance, so new proposals designed to improve matters on this front can only be positive.
"For many, small businesses are the lifeblood and key drivers of the improving economy. However, they need the right support in order to continue to push in the right direction.
"We would urge SMEs to seek professional advice regarding the finance options available to them and how they can move forward and achieve their ambitions."
Fergal Dowling - Partner