Banks to Be Asked to Share More Information on Their SME Clients

Posted on 27.12.2013, by Rob Warlow

In the government’s quest to make more finance available to SMEs it has announced its intention to help alternative financiers have access to better information on SME’s credit background.

The commitment to make it easier for newer lenders to assess loan applications via improving access to SME credit data was made in the 2013 Budget. Since then the government has been working with the Bank of England, the Office of Fair Trading, the Financial Conduct Authority, the Department for Business, Innovation and Skills, and the banking industry to investigate options.

If you have read my blogs you will know that when assessing the creditworthiness of small businesses an important source of information for the lender is a business’ past financial performance. The problem is that more in-depth information (outside of that held by the Credit Reference Agencies) is often held by the bank that provides the business’ current account and is not widely shared.

The result of this is that challenger banks and alternative finance providers don’t have access to the same level of information as the bank with which the small business already has a relationship.

The solution being proposed by the government is that banks will be required to share information on their SME customers with other lenders through Credit Reference Agencies (CRA).

The government has opened a consultation period until mid February for industry players and other interested parties to comment. It will be interesting to see the banks responses to the request to share a deeper level of information they hold on their clients.

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