UK banks will be forced to help SMEs find funding » SMEInsider

UK banks will be forced to help SMEs find funding

Banks who are unable to offer financial support to SMEs will now be required by law to assist them in finding alternative funding, it has been announced.

The new legislation is included in the Small Business, Enterprise and Employment Bill, currently before parliament, and is supported by an additional £100m in government funding, allocated to the British Business Bank’s state-owned investment programme. Rule changes mean that banks that turn down loan applications from SMEs will have to ask whether they would like their information to be forwarded to online platforms, which then try to match them up with suitable funding sources. These alternative sources will include smaller banks, crowdfunders and fintech investors, peer-to-peer lenders and invoice finance providers.

Forcing banks to refer businesses to alternative lenders is something I’ve been determined to make happen,” said Business Secretary Vince Cable. “It’s good that more SMEs are making use of alternative finance but the big banks still dominate and small businesses often give up if they’re turned down for finance by their bank.”

The UK needs a diverse and competitive business finance market like Germany and the US if our SMEs are to thrive, and that is why the Business Bank is so important. Money is already reaching small businesses, but my ambition for the Business Bank is to radically alter the overall market landscape,” he added.