September 10 2014.

The government intends forcing banks to promote alternative lenders when they can’t provide funding themselves. Some believe that it will also go a long way towards publicising the wide range of options that are available to firms, some of which aren’t so well known to SMEs.

The ACCA thinks that “the idea of a referral system is a good one and, if executed properly, could be a major benefit to SMEs in the UK, but strict safeguards will need to be in place in the legislation when it is published. A poorly designed referral scheme could risk labelling participating SMEs as sub-prime borrowers, inviting a lower quality of credit provider, and encouraging irresponsible lending practices or discourage good practices within existing banking relations.”

The proposal is seen as a means of countering the potential anti-competitive impact of the appeals process, which essentially gives banks a second chance to hold on to unsatisfied customers.

The government’s latest view on the subject is available HERE.