A new task force to advise the Government on how to ensure small companies are treated fairly and properlywhen accessing bank finance was April 1st launched by the Department for Business.
Enterprise Champion Lord Sugar, outgoing Federation of Small Business chairman John Wright and former Lloyd’s TSB deputy chief executive Mike Fairey will comprise the task force. They will build on the work Lord Sugar has been doing with small businesses, Business Link’s Financial Intermediary Service (FIS) and the banks.
The task force will advise the Government on the role and responsibilities of the Small Business Credit Adjudicator (SBCA) announced in the Budget. Once established the SBCA will hear cases, referred by FIS, where a business may have been unfairly denied credit. The task force will also hear recommendations on the background, experience and skills to be considered when recruiting the independent SBCA, who will be experienced in banking and business markets.
Business Secretary Lord Mandelson said:
“Lord Sugar, Mike Fairey and John Wright have decades of experience in banking, business and enterprise. They understand the critical importance of new finance and credit flow to the growth of small, innovative companies.
“This Government has worked tirelessly to help small businesses access the finance they need. However there is a perception among small business owners that banks are unfairly denying them credit. This task force will help us understand the root of these concerns.”
The task force will meet bank and small businesses to discuss financing and credit issues to establish the responsibilities of the SBCA. It will produce a consultation document to be published in the summer, which will advise on options to establish the SBCA.
The consultation will consider potential powers and sanctions for the SBCA. Options will include powers to demand bank information and penalties such as naming and shaming banks found to have denied credit unfairly.
The SBCA will work in conjunction with Business Link’s Financial Intermediary Service. The FIS offers free and independent advice to viable business struggling to gain access to finance. It facilitates discussion between the bank and the business if FIS believes the bank’s decision should be re-considered.
Once the SBCA has been established FIS will be able to refer such cases to the Credit Adjudicator if they believe the business has been treated unfairly.
Government lending and survey data shows that the majority of the UK’s Small and Medium Enterprises (SMEs) who require finance are able to access it, and currently at prices lower than two years ago. Around three quarters of small businesses obtain finance from their first source, consistent with approval rates for loans and overdrafts in excess of 75 per cent.
However the perception of a shortage of credit for small businesses remains in place and there have been small but important cases where viable businesses have been turned down. The Small Business Credit Adjudicator aims to address that issue.
The Government has put in place a number of significant measures to ensure that SMEs – the lifeblood of British business – have the support they need to grow. Real help offered to businesses through the difficult economic period include the Enterprise Finance Guarantee, the ‘Time to Pay’ tax deferral scheme and free Business Link Health Checks.
Source: © Department for Business, Innovation and Skills