15 June 2015

New law on access to finance will benefit small businesses

In one of the last items of business conducted by the previous Parliament, the Small Business, Enterprise and Employment Act 2015* received Royal Assent on 26 March, just under two years after it was first published in draft. This wide-ranging Act received cross- party support during its passage through Parliament.

While the new Act covers everything from zero-hours contracts to director disqualifications, one of the core components deals with the availability of (or lack of) finance for SMEs and start-ups - one of the BPIF's five Priorities for Print. Under the new legislation, 10 of the UK's largest lenders will be required to refer the details of any SME whose loan application is denied (with the SME's permission) to an online finance platform that can help match them with alternative finance providers.

The 10 financial institutions that will be required to provide referrals under the scheme are: RBS, Barclays, Lloyds Banking Group, HSBC, Santander, Clydesdale Bank, Yorkshire Bank, Bank of Ireland, Allied Irish Bank and Danske Bank. The legislation will open up access to small business credit data held by the big banks, and is designed to make it easier for a small business to seek a loan from a lender other than their bank. The scheme is being administered by the British Business Bank, which has called for Expressions of Interest from alternative finance providers that would like to take part in the referral system.

Measures that will help small businesses include:

• Improving access to finance by introducing ‘cheque imaging' to speed up cheque clearing times and to increase customer choice in ways to pay
• Increasing transparency on payment practices and policies through a new reporting requirement on the UK's largest companies 
• Ensuring that regulations affecting business are reviewed frequently and remain effective. The government is introducing a target for the removal of regulatory burdens to be published in each parliamentary term, holding future Governments to account and enabling small firms to grow and get on with doing business
• Appointing an independent Small Business Appeals Champion for non-economic regulators to ensure that the needs of business - particularly small firms - are taken into account with an understandable and effective appeals and complaints process
• Assisting small business expansion overseas, increasing the support available from UK Export Finance and widening its powers to help UK exports and exporters, making it easier for all businesses, regardless of size, to expand in the international marketplace
• Streamlining public procurement to remove barriers so that small businesses can gain better, more direct access to public sector contracts. Further measures will make it easier to raise concerns about poor procurement practices, ensuring these are small business friendly
• Providing reserve powers enabling the Business Secretary to ban pre-pack sales to connected parties, to be used in the event that the voluntary reforms set out in last year's report on pre-packs by Teresa Graham CBE do not achieve the desired improvements in transparency in pre-pack sales

Other measures in the Act include:

• Preventing ‘exclusivity clauses' in zero-hours contracts that stop individuals from working for another employer, even if the current employer is offering no work
• Deterring employers from breaking National Minimum Wage legislation by amending the power to set the maximum penalty for under payment, so it can be calculated on a per worker basis
• Increasing transparency around who owns and controls UK companies, and helping deter and sanction those who hide their interest in UK companies to facilitate illegal activities, including the creation of a publicly accessible register of people with significant control over a company
• Strengthening the rules on director disqualifications to widen the matters of misconduct courts must take into account when disqualifying, including conduct in overseas companies, and measures to help creditors recoup losses resulting from director misconduct
• Reforming employment tribunals by encouraging more efficient management of tribunal postponements in order to reduce delay and cost, and introducing a penalty to ensure that employment tribunal awards are paid promptly and in full
• Streamlining insolvency law to remove unnecessary costs and ensure effective oversight of insolvency practitioners so they deliver their services at a fair and reasonable cost that reflects the work undertaken
• Providing new and improved information on learning outcomes by tracking students through education into the labour market, fostering self-improvement by schools, colleges and higher education providers and informing government policy

*See http://www.legislation.gov.uk/ukpga/2015/26/pdfs/ukpga_20150026_en.pdf