Business banking is about to change Until now many small businesses apply to their local bank for a loan or an overdraft. If they are refused, they frequently give up on raising finance and manage without, resulting in a lost opportunity to grow the business. But that is about to change.
In the fourth quarter of 2016 the provisions of the Small Business Enterprise & Employment Act 2015 comes into effect. This legislation requires the main banks to refer businesses refused finance to alternative finance platforms. If refused finance, a business must receive a letter from the bank specifying why the application was refused. It will also offer the business the opportunity to be referred to three platforms nominated by the government for further consideration to access finance. It will be up to the business to accept the offer of a referral or not.
Where can businesses go for advice? One of the weaknesses in the referral system is that it relies on the information provided to small businesses by the finance platform and its finance providers. Businesses should spend time on the finance platform and their suppliers’ websites understanding what they may be offered. So it will be up to the finance suppliers to make it clear what the terms and conditions of any offer of finance may be. Many ICAEW firms are well practised in negotiating finance arrangements on behalf of clients. Businesses offered the opportunity of a referral by a bank, may want to discuss their options with an ICAEW Chartered Accountant.