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Small Business, Enterprise and Employment Act 2015

Small and medium sized businesses: information to finance platforms

14.The largest four banks account for over 80% of UK smaller business’ main banking relationships. Many small businesses approach only these largest banks when seeking finance. Although a large number of these applications are rejected - in the case of first time small and medium sized business borrowers the rejection rate is around 50% - a proportion of these are viable and are rejected simply because they do not meet the risk profiles of the largest banks. There are often challenger banks and alternative finance providers with different business models that may be willing to lend to these small and medium sized businesses.

15.The Government therefore announced at Budget 2014 that it would consult on whether, and if so how, to take legislative action to help match small and medium sized businesses that have been rejected for loans with challenger banks and alternative finance providers that are looking to offer finance.

16.The consultation sought views on whether there should be a process backed by legislation whereby smaller business that are rejected for finance could have information about them provided to platforms that would help them to make contact with alternative lending opportunities. The Government published a summary of responses in August 2014, confirming that there was widespread support for these proposals, and that it would proceed with legislation.

17.Section 5 contains provisions giving the Treasury power to make regulations:


requiring designated banks to share information on businesses that they reject for finance (where those businesses have agreed) with online platforms that will help them to make contact with alternative lenders;


enabling HMT, on advice of the British Business Bank, to designate private sector platforms to receive the information;


setting out clear criteria for the designation of platforms, including: ensuring small and medium sized businesses’ information is properly protected, and removed at businesses’ request; and giving fair access to credible alternative lenders; and


enabling HMT to de-designate platforms that fail to meet minimum standards.

18.These provisions are designed to complement the provisions on Small and medium sized businesses credit data (section 4).

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