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Codat – the universal API for small business data – and a group of lenders have written an open letter to Secretary of State for Business, Energy and Industrial Strategy, Grant Shapps, calling for the government to support improved data sharing initiatives to tackle the difficulties faced by SMEs in accessing credit.
The letter has been co-signed by Atom Bank, Funding Circle, iwoca, Allica Bank, SPRK Capital, Recognise Bank, Plaid, Playter, OakNorth, Wiserfunding and TrueLayer. It has also received support from the Federation of Small Businesses (FSB).
Difficulty accessing funding is one of the biggest barriers to SME growth. The problem exists because the SME lending landscape is not set up for businesses or lenders to succeed. It’s too difficult for lenders to access accurate, up to date data to make informed decisions and loan applications are too complex and time-consuming for SMEs.
Stimulating growth in the SME sector – which contributes 50 percent of GDP and 60 percent of employment in the UK – is key to ending the ongoing recession. Improved data sharing between the financial tools used by SMEs and lenders is key to solving the problem, as set out in the ‘Closing the small business funding gap’ research report.
The technology required to improve data flow and accessibility between the financial tools used by SMEs and lenders already exists. Legislative support from the government to progress on Open Banking, support lenders and small businesses is long overdue.
The letter calls on the government to pass the Data Protection and Digital Information Bill, ensuring that the legislation applies to data needed for SME underwriting. And, to move swiftly to consult with the industry on how technology can be implemented to improve SME access to credit.
Pete Lord, Codat CEO, says “We in the industry are ready to drive the implementation of this progressive technology and legislative support from the government can play an important role in ensuring its success.”
Martin McTague, National Chair of the FSB, says: “Small businesses’ access to finance is essential for growth, investment, and innovation, and we’re concerned that our research indicates that small firms’ appetite for external finance is reducing. At the same time, the number of those accepted for finance is falling, while the interest rates offered to those who do succeed are rising fast.
“We’re going to need to explore new ideas to change this around, such as the lending passport, which has the potential to help small firms in their search for funding by simplifying the application process, saving them time and duplicated effort. Anything which promotes competition and a greater range of options in the finance market is especially critical, and especially welcome, right now.”