ACCA responds to government plans to refer bank-loan-refused SMEs to alternative finance providers
Manos Schizas, head of SME policy at ACCA said: “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, invite a lower quality of credit provider, encourage irresponsible lending practices or discourage good practices within existing banking relations.”
ACCA, the global accountancy body, first called for a referral scheme back in 2011, when the SME loan appeals process was introduced. ACCA saw referrals 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 professional body has monitored the implementation of the loan appeals process since and believes the two initiatives are strongly complementary.
Safeguards recommended by ACCA would include excluding businesses with CCJs taken out against or other obvious signs of financial distress, and a cooling-off period for borrowers opting into the referral scheme, ensuring that the scheme cannot become a last chance saloon for businesses. The professional body also insisted that referrals be made conditional on bank clients receiving feedback on the reasons for their application being rejected, and being offered use of the loan appeals option.
Manos Schizas added: “Crucially, we believe that the scheme should actively encourage businesses to provide better financial information where possible, as opposed to the minimum range of information acceptable for SMEs. Without this safeguard, the supply of financial information to credit providers could be limited, hurting the credibility of the scheme.”
