As the U.K. government is working to respond to small business concerns over late payments, policymakers are also tackling another SME issue: lending.
The head of the British Business Bank has announced plans to enact a new program by 2016 to facilitate traditional lenders and big banks in referring small businesses that have been rejected for a loan to alternative financing options. The Bank also revealed Tuesday (March 24) that it is now inviting applicants interested in running an online platform that would connect these small businesses to alternative lenders.
While the Bank said it is looking to implement the scheme by next year, officials said they did not want to do so in haste.
“We will definitely want to have something in place by 2016,” said British Business Bank Managing Director Andrew Van Der Lehm. “The banks need to implement it and we need to get the systems right. It’s better that the system is implemented well than we rush it.”
The platform is part of the U.K. finance ministry’s plans introduced last year that mandate the nation’s 10 largest banks, including Barclays, HSBC, RBS and Lloyds, to offer information on alternative financing options to SMEs that had not been approved for a traditional loan. According to reports, these four lenders currently provide about 90 percent of business loans.
But reports also note the emerging strength of the U.K.’s alternative financing industry, which is expected to more than double in value this year. The market has been declared the strongest in the world, and a new research report released by the University of Cambridge and Ernst & Young revealed that the U.K.’s alternative lending sector makes up nearly 75 percent of the whole of Europe’s.
The U.K. Treasury, however, has taken a more critical stance of the industry having released its report earlier this month that warned that alternative finance can also come with similar downfalls seen with traditional lenders when it comes to small business financing. The Treasury’s findings were part of broader research by the government into the state of small business lending and SMEs’ access to capital.