Banks forced to disclose details?
The traditional option. According to government research, directors of smaller companies (over 80%) usually approach their current bank for help first whenever their business is seeking credit or finance. Over half of those that do, end up being rejected and they make no further attempts to secure the required funding. This is primarily because they think there’s nothing more they can do.
Pass on details. In fact, there are many other finance options out there - such as crowd-funding and peer-to-peer lending - and the government is keen to push those alternatives. However, rather than an advertising campaign, it’s seriously considering legislating so that the banks would be forced to pass information about the small companies they’ve rejected for finance over to alternative finance providers. At the moment, it’s suggested this would be “with the rejected company’s permission” but that may not end up being the case.
Good or bad? The main reason for this proposal is that it would allow alternative finance providers to approach you with offers of assistance. This could be a good thing as it may result in suitable funding, but there’s a downside. Even if you gave your consent, companies aren’t covered by the Data Protection Act 1998 so, as matters currently stand, you would have no recourse if information about your rejected finance applications fell into the wrong hands.
Tip. If you want to have your say on the government’s proposals - or if you just want to tell it what you think about the lack of funding that’s available for small companies generally - respond to its open consultation on SME finance (see The next step ). The deadline for submitting your views by e-mail is 11.45pm on 25 April 2014.
To respond to the government’s consultation on SME finance, visit http://tipsandadvice-companydirector.co.uk/download (CD 15.14.01).