Government data sharing scheme will reduce SME finance gap

SME finance monitor shows only 41% of SMEs seeking finance were confident the bank would lend to them in Q4 2017.

Nic Beishon, Head SME of Commercial at Equifax, said “There are millions of companies in the UK with fewer than 10 employees and many who apply for finance often have a limited credit history – this lack of available information makes it difficult for lenders to evaluate and underwrite loans. The Commercial Credit Data Sharing (CCDS) scheme, now live, seeks to stimulate competition and encourage new entrants in SME lending to address this financing gap. It covers not just the smallest UK businesses, but any company with a turnover of up to £25m – 99.9% of the entire UK business population.”

“CCDS will open up secure sharing of detailed business current account data and up-to-date information on the performance of existing loans and corporate cards from the leading business banks. This data, now available, will help close the financing gap by giving lenders a more complete picture of a businesses’ financial health, in particular benefitting SMEs who only occasionally apply for finance. With an in-depth view on a borrower’s financial activity, banks and non-bank lenders will be able to offer SMEs more competitive loans. Access to CCDS data will also give lenders the ability to track a customer’s financial status, alerting them to potential problems with repayments, allowing lenders to identify an appropriate course of action early on. This will help them adopt lending standards introduced last year, better supporting SMEs in times of financial stress.

“This data sharing scheme has the potential to revolutionise how lenders evaluate loans, allowing them to make faster, more informed lending decisions. A healthy SME sector will help the UK economy flourish; combined with industry initiatives including Open Banking and the Payments Services Directive 2, CCDS will transform SME lending and facilitate growth in the sector.”

Also responding to the report, Stephen Pegge, Director of Commercial Finance, UK Finance, said “This research suggests there has been a recent uptick in demand for finance amongst SMEs, while banks continue to approve around eight in 10 applications from smaller firms. It is encouraging that increasing numbers of small firms are looking to use finance to grow their business in the year ahead. However, most SMEs are still self-funding, with the vast majority not seeking any new external finance in the past year.”

“Just one in 20 SMEs see access to finance as a major obstacle, far behind issues such as red tape, the current economic climate and political uncertainty. It appears that most small business owners are carefully considering their options before seeking external finance, with larger SMEs more likely to borrow to help expand their business.”