The government has published draft legislation introducing new measures to help smaller businesses source the finance they need.
The legislation, which forms part of the Small Business Enterprise and Employment Bill, will introduce a requirement that banks turning down small and medium-sized enterprises (SMEs) for loans must offer to share their details with government-designated platforms that will help match them with alternative lenders.
Over half of SMEs seeking finance for the first time are rejected and research suggests most of them do not try again.
The new measures are designed to help bridge the gap between SMEs not being aware of lending options other than banks that could meet their needs and alternative finance sources – such as peer-to-peer lenders and crowd funding platforms – not knowing these businesses need a loan.
Economic Secretary to the Treasury Andrea Leadsom said on 15 October: “A key part of our long-term economic plan is to ensure that small businesses are able to access the finance they need to grow and succeed. The best way to deliver this is to increase competition in the sector and remove the barriers to new sources of finance for SMEs.”
The government originally consulted on the proposals in March 2014, receiving widespread support for the proposals. The Small Business Enterprise and Employment Bill is expected to come into force in early 2015.