The Bank of England official has suggested that if more detailed information was provided in regard to a SMEs credit history, it would allow banks to make a more informed decision on credit risks involved; which in turn could boost lending by banks to businesses – and therefore boost the economy.
The comments come following the release of an official report which has suggested that small businesses are failing in their attempts to secure finance from banks, as a result of “personal issues” with founders’ credit ratings, rather than problems with the business plans submitted.
According to the report, which looked at appeals by businesses who had been rejected finance, small and medium sized businesses are being judged on the personal credit score of the business founder, which is leading to them being turned away before a proper exchange has taken place.
The data within the report has highlighted that over half of those who were rejected a loan of less than £25,000 were turned away as a result of a personal credit score.
In an effort to help tackle the issue, HMRC have already began a pilot scheme to share data on a company’s VAT payments with credit ratings agencies, enabling more reliable information being provided to banks and other finance providers.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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