The Federation of Small Businesses (FSB) is calling for improved lending standards and an enhanced British Business Bank (BBB) in support of new recommendations from the BankingFutures initiative.
FSB is urging all banks to sign-up to the Lending Standards Board (LSB)’s standards of practice for business customers, as set out in the ‘Banking Small Businesses’ report launched today.
The report recommends that banks issue standardised lending contracts to small firms, making it easier for them to compare indicative offers between banks, alongside accessible one-page summaries of deal terms. FSB is also lending its weight to calls for banks to obtain explicit consent from small firms for their loans to be sold on in the event of a sale.
Mike Cherry, FSB National Chairman, said: “The LSB’s standards offer a win win for the small business community. Signatories are instantly more attractive to potential customers and small firms can rest easy when agreeing terms with adherents.
“We need to create an environment where small businesses are fully aware of all the finance options available to them and understand exactly what they’re signing-up to when they take out a loan. Information asymmetry is, quite simply, bad for business.”
The new Banking Futures report urges the Government to extend the mandate of the BBB, providing it with sufficient resources to undertake expansive data collection on supply of, and demand for, SME finance. FSB is calling for this research to take place at a regional level to support access to finance for small firms in all areas of the UK.
The report recommendations echo those set out by the FSB in its ‘Reformed Business Funding’ report published earlier this year.
Mike Cherry added: “With Brexit talks underway, we must ready the BBB to replicate the critical support that the European Investment Bank and European Investment Fund have provided to small businesses in recent years. The £400m boost for the BBB’s support of finance markets unveiled in last year’s Autumn Statement was welcome, but it will need further resources if we’re to see an improvement in the ability of small businesses to access finance.”