We are The voice
History was made last week when the very first parliamentary Act specifically relating to smaller businesses was passed by Parliament.
The measures in the Small Business, Enterprise and Employment Act will help small and medium-sized enterprises have more control over their payment terms with larger businesses, have the freedom to more easily access finance options and allow them to more readily access government support.
Banks are focused on businesses getting the right finance, at the right time and in the right mix. For some time now, banks have shared data with alternative lenders and have had partnerships with accountants, brokers and specialised lenders, to whom they have referred businesses to when bank finance isn’t appropriate.
The legislation lays the pathway for greater sharing of information between government, banks, alternative lenders and credit reference agencies. This will promote more choice for businesses from finance providers by allowing a more accurate assessment of their credit history and a choice of options if a bank is not able to service the business’s needs.
Through the Act – which will work alongside bank strategic partnerships – a new process will be created that means businesses declined bank finance will be given the choice to be referred onto new platforms housing various alternate lenders.
A business that has been declined a form of bank finance can be passed onto the platform, and from there a diverse range of other banks and alternative lenders can learn more about the firm and offer them funding if they think there’s a good fit. So, in theory, you could approach a high street bank as start-up looking for a loan, and end up with a peer-to-peer or community finance loan. Thanks to the Appeals Process, you can also ask for your original application to be reconsidered by the bank at the same time.
In order to make borrowing easier in the first place, there are other measures in the Act to improve the data available on small businesses. The BBA has been working with government and credit reference agencies to suggest better ways to make sure that decision-makers have comprehensive information about business borrowers, so that even more accurate and quicker credit assessments can be made. It is therefore ground-breaking for the Act to enable government to disclose non-financial VAT registration data as this will improve the reliability of credit scoring information, as well as help businesses reduce fraud and comply with their anti-money laundering obligations.
The legislation also has measures to help unplug issues like late payment, which is often a major factor in stifling the cash flow of businesses and can lead to financial difficulties.
Where businesses are looking to grow and trade overseas, the banks have supported measures in the Act which make changes to the constitution of UK Export Finance (UKEF) – the body which supports exporting – to allow it to be more flexible when it comes to helping businesses in export supply chains.
Banks often work hand-in-hand with UKEF and the BBA called for these changes, which means that even more businesses should be able to benefit from the various export schemes government runs to help boost international business.
For a long time now, the BBA and its members have been speaking with government, business groups and alternate finance partners to make sure that businesses get the most out of the Small Business, Enterprise and Employment Act. We have been on a journey culminating in a historic new Act – we now look forward to putting it into action.