Great news

The announcement from George Osborne that legislation will be introduced so that banks match SMEs that have been rejected for loans with alternative finance providers, comes as no surprise to us, but is hugely welcome nonetheless.

From the outset, the principle behind our collaboration with other alternative funders was to provide a simple and safe journey for businesses to access quality alternative funding if they were not able to, or did not wish to, obtain finance from a main bank.

Our alternative business funding portal has been an outstanding success already, with thousands of businesses having already passed through the site to an appropriate funder. But, it was always designed to exist in an environment where banks and other significant credit providers were required absolutely to signpost rejected SME owners to the now vibrant alternative funding sector.

The confirmation from The Treasury that our initiative will, indeed, pass into legislation is both sensible and pragmatic.

What we are seeing is the first steps of a journey which will, ultimately and permanently, change the way small business owners access finance for growth going forward.

This is a very positive move for the economy and Clifton are proud to have played such a significant part in this and look forward to continuing our close work with The Treasury to ensure that what is finally delivered is simple, fair, transparent, but most of all gets real results.

In his statement George Osborne said: “Today I can announce that as part of the first ever Small Business Bill going through parliament, this government will legislate to require the big UK banks to pass on information on small businesses they reject for loans, so that FinTech companies and alternative lenders can step in and offer finance instead.

“So often a small business will be suitable for finance, but 70% only approach one bank and nearly 40% give up at the first attempt. Meaning many businesses just don’t get the finance they need.”

Great news indeed!

The devil’s in the details

As predicted, the recent Queen’s Speech contained further commitment from this government to drive positive action benefitting small and medium-sized businesses in the UK.

The Small Business Bill will be published on 16 June 2014, followed by Second Reading, Committee and Report Stages and Third Reading of the Bill in the Commons before it reaches the Lords and completes its passage through both Houses by March 2015, in time for the General Election.

This is expected to be a fairly extensive bill that tackles many of the issues SMEs face and is the first consolidated attempt to provide comprehensive government support targeted directly at this vital component of the UK economy.

The coalition government should be congratulated for taking this decisive action.

However, as is always the way, the devil lies in the detail and we will have to wait until next week to find out just how this is all going to work in practice.

Our interest in this area is twofold.

Firstly, as innovators in the area of SME finance through our pension-led funding solution, we are acutely aware that the major lenders have long dominated the landscape, with many business owners simply unaware that they have credible and actionable choices in the funding marketplace. Any move by the government to legitimise alternatives is positive, and embedding the notion of the acceptability of alternative funding methods in legislation is an extraordinary advance.

Secondly, as the founding and developing partner of the funding portal we can rightly claim to have helped advance the thinking in this area. The government’s own consultation document explicitly references a portal option for banks to refer their rejected SME clients and we have been involved in this conversation from the start.

It remains to be seen how the government will interpret and implement this thinking going forward, but at the very least this vital area of funding is now well and truly on the radar.