Small Business Advice

How banking reforms could make it easier to get finance for your small business

23 May 2016

Access to finance can be the biggest barrier to starting a business.

Industry regulator the Competition and Markets Authority is looking to improve competition and access to banking and this week released early recommendations before a full report is unveiled in August.

It identified issues with SMEs sticking with their current account provider when searching for overdrafts and loans and a lack of transparency when it comes to costs.

So how could access to finance be reformed?

More transparency

Business Financing Options

Banks and building societies will have to display information on their customer service and how long it takes to open an account.

The data will have to include a customers’ willingness to recommend the provider’s current account services to friends, family or colleagues as well as opinions on the service in branch, online and relationship management.

The information would need to be displayed on the provider website as well as on price comparison tools.

Soft searches to protect your credit rating

Solopreneur Working Alone

Searching for credit can be time consuming and confusing.

Too many searches can also hit your credit score. The CMA has proposed introducing soft searches and loan eligibility calculators that would not affect an SME’s credit rating but would give an indication of the finance they could get.

All lenders that provide unsecured loans and overdrafts to SMEs will need to display on their websites rates showing the cost of finance up to the value of £25,000.

These rates must show the representative annual percentage rate for unsecured loans and an equivalent annual rate for overdrafts to enable SMEs to make comparisons on the total cost of credit.

The rates that these lenders publish must be made available to at least 51% of SME customers applying for these products.

In addition, lenders must make available these charges, terms and conditions, and how APR/EARs vary with loan size and length, as open data to third parties, such as comparison sites and finance platforms.

Switching provider

Financial Institutions

The CMA found that the account opening process was a barrier to switching for some SMEs.

Instead it would like to require all business account providers to agree and adopt a standard form and common evidence requirements for applicants.

If everyone requires the same information this should also make the switching service easier.

The CMA is set to launch a competition with innovation charity Nesta to identify possible solutions to the problem of limited access by SMEs by creating a comparison website.

The report also recommends accountants’ help SMEs shop around for finance.

Keir Wright-Whyte


Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.


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