Government launches new lending scheme for SMEs

New regulations aim to make it easier for SMEs to secure finance

The government is aiming to give growth-hungry SMEs a potential funding boost with a new credit-data sharing scheme.

The programme is designed to make it easier for new challenger banks and alternative finance providers to check the creditworthiness of potential business customers, thereby increasing the flow of credit to SMEs.

The government now requires nine banks and three credit reference agencies to share the credit information they hold on SMEs equally with all finance providers, with the SME's permission.

According to the government, a lack of information about the creditworthiness of SMEs has been a barrier to competition in the SME lending market.

The nine banks in the regulations are RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Banks, Bank of Ireland, Danske Bank and First Trust Bank.

These banks will be required to share credit information on their SME clients with Experian, Equifax and Creditsafe, which must then share the information with all financial providers equally.

Harriett Baldwin, economic secretary to the Treasury, said: "Small businesses are the backbone of Britain's economy and it is right we make every possible source of finance available to them."

Data sharing is expected to begin later this year when tests between banks and credit reference agencies confirm that data can be shared accurately and securely.

Shaune Parsons, joint managing director of Computerworld Wales, said he thinks this is the government having "to be seen to do something."

He said: "I'm sure they think their heart is in the right place but I think they are doing it for the sake of doing it."