The head of the British Business Bank has communicated with the BIS select committee that when it comes to assisting SMEs who are looking for alternative finance it is proven difficult.
During July 2016, CEO of the BBB, Keith Morgan expressed to MPs that he wishes to work harder on the dissolving bridge between banks and alternative finance and that banks must play a big part in making that happen.
When asked to share his voice on what is working in that area Keith stated to the committee;
“We find that 90% of SMEs go to the current provider, which translates into an 80 market share,
“But if they don’t get what they need from the bank, half of them take no further action. That’s a lost opportunity…”
“The big area where we want to see more impact is awareness, and we want to help SMEs get a better handle on the options open to them. We worked with the ICAEW and others to do this. There used to be 23 different voices – the CBI, FSB and so on- and we’ve brought them together produced a finance guide that has been well received,”
He continued to say that one million copies have been sent out so far;
“We’ve discussed with the BBA that the guide would be available and handed out at the point of ‘no’ from a bank.”
Responses from partners associated within the guide have come back positive so far, Keith added that 9 banks will now offer SMEs alternative finance as an option when they cannot help them themselves. The British Business Bank has split the platforms into 3 as the main alternative finance providers. They believe that the guide created will hopefully work well in their favour.
It’s an industry that has campaigned to be regulated, as they see having a regulation provides confidence to investors and possible borrowers going forward. Christopher Woolard, FCA Executive Director of Strategy and Competition communicates with the committee where on the same day announced that the regulator is aiming to push harder to guarantee the regulation of equity crowdfunding and P2P lending is ‘proportionate.’
When asked about the areas of unease surrounding crowdfunding he continued to say;
“It’s a potential source of new competition and we wanted to make sure we had a proportionate regime that slows competition and confidence. The volume is close to 7% of total business loans, so larger SMEs are clearly using it.”
Former business minister, Anna Soubry was questioned by committee chair, Iain Wright about whether she thought there was an issue with alternative lending and if it has the right balance she responded with;
“I get the feeling we’ve got the balance right.
“You have to keep your eye on it so it’s properly regulated. The biggest problem in my view is awareness. I know people who have never heard of crowdfunding and there is a level of ignorance in the real world, beyond London, and we have work to do to improve the understanding of alternative finance.”