Rejected by the bank? Don’t give up…


The British SME market is stronger than ever. There are now over 5.2 million SMEs in the UK accounting for more than 99% of all businesses and employing over 14 million people.

A recent study showed that almost 40% of SMEs stop their search for finance after being declined by their bank. Given that the largest four banks account for over 85% of UK SMEs’ suggests that the majority of SMEs only get as far as their own bank.

But are the banks doing enough? Of the businesses only 28% are aware of Government schemes whilst 32% know about crowd funding. Do the largest banks need to do more?

A good starting point is the consultation outcome published by the Government, Competition in banking: improving access to SME credit data. Such data is typically held by the bank and not widely shared therefore creating a barrier for challenger banks and alternative finance providers. Such alternatives do not have access to the same level of information as the bank with which the small business already has a relationship.

Although the banks do share some of their data with at least one Credit Reference Agency (CRA) – the government is considering amount of and frequency of data shared with CRAs. As a result of increasing the supply of SME credit data to the CRAs will improve the accuracy of credit assessment and in effect stimulate further competition in SME lending.

As a result of the consultation the government intends to introduce legislation in the next session of Parliament to tackle the issue.

Is this enough?

Whilst it’s a welcome move by the government it still does not fully solve the issue that is awareness of alternative finance options. More needs to be done to reduce the 40% of SMEs who stop their search for finance.

Companies such as Co.Hub are being set up to enable an advanced level of comparison to change the industry just as comparison did for consumers.