From April, the 1st the new SME credit data sharing scheme went live and it was created to give SMEs a boost when accessing finance – the aim of the scheme is to make it easier for banks and alternative lenders to see credit checks of their foreseeable ‘business customers.’
The government has set out to require 9 banks and 3 credit reference agencies (CRAs) to disclose SMEs credit information (with their permission) to all finance providers in order for the competition to increase within the SME lending market.
Within the new regulations, RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale & Yorkshire banks, Bank of Ireland, Danske Bank and First Trust Bank (the Northern Irish subsidiary of Allied Irish Bank) will be obliged to share the data they obtain about their SME customers along with specific CRAs who are; Experian, Equifax, and Creditsafe they will then have to share their data fairly with all lenders.
Economic secretary to the Treasury, Harriett Baldwin has commented on the scheme;
“Small businesses are the backbone of Britain’s economy and it is right we make every possible source of finance available to them.
“The best way to deliver this it to increase competition in the banking sector and remove the barriers to new sources of finance for SMEs. Requiring banks to share data is a major structural reform that will level the playing field between banks and alternative finance providers’
Currently, tests are being carried out between 9 banks and 3CRAs to make sure that SME’s data can be distributed accurately and safely.
Head of Businesscomparison.com Philip Brennan has said;
“As alternative lenders become popular, banks are working harder to secure their faith in them. I think once the scheme takes place this year competition will rise and it will be good to see rates reduce with competition. The most significant thing is SMEs having different options which will ultimately help them either long-term or short-term. Potentially, businesses with access to funding will help accelerate the economy.”
Businesscomparison.com have partnered up with FundingXchange an alternative source to finance for SMEs. Funding Xchange has recently been successful for a Bank Referral Scheme carried out by the Government which will allow them to help some of the nearly 100,000 SMEs in the UK which stand for almost £4bn worth of businesses who have previously been declined by the banks.