While George Osborne's Autumn Statement didn't directly address the alternative finance space, there were a few surprises that have a significant impact on business lending and the traditional providers.
After whispers of an extension to the Funding for Lending Scheme, it appears as if the proposed scrapping of the imitative may now go ahead as planned this January – the only commitment is that the scheme will run into 2016. The decision to go ahead and end the scheme should be seen as a show of confidence in alternative providers. As recent lending figures have shown, peer-to-peer lenders are more than capable of giving small businesses access to the funding they need, with more than £3bn being lent to businesses from peer-to-peer lenders this year. The government should now focus on getting more funds into state-backed development funds like the British Business Bank, which has partnered with providers of alternative finance to get much needed funds to UK business owners – totally bypassing the high-street giants.
There was one welcome extension, with the doubling of small business rate relief to continue until April 2017, having been originally pegged to cut off in April of next year. This affects over 600,000 businesses, on full and tapering relief rates – an easy win for the government, and a simple show of support for SMEs.
Tucked away in the full copy of Osborne's Autumn statement was more information on new plans to force banks to share the data they hold on small businesses. Whilst details are scarce, and that’s usually where the devil lies, it would appear that banks will be required to open up access to the accounts data of businesses to three credit information giants - Experian, Equifax and CreditSafe. This is really exciting, as more open data can vastly improve small businesses’ access to finance.
At MarketInvoice the more we know about a business, the more confident we can be in lending to them. There is a downside to the announcement though. We presume lenders will need to purchase this data from the credit reference agencies, and at what will almost certainly be a premium price. With such a clear three-way oligopoly competition between credit agencies has taken a big hit; which in time could spell bad news for everyone. In the short-term small businesses are the real winners here; business owners will have a better, broader array of funding options. But the chancellor certainly could have been bolder in using bank data to help small businesses. By forcing three specific credit reference giants into the middle of the lending process, innovation will be stifled. Instead he could have found a way to open data more widely. A good day for SMEs, but it could easily have been a better one.
Anil Stocker is the co-founder of MarketInvoice.com