U.K. to Look at New Rules to Raise Small-Company Funding

The U.K. government is considering rule changes that would make it easier for new banks and alternative finance providers to provide funding to small and medium-sized companies.

The proposed regulations would help new entrants to the funding market check the creditworthiness of smaller companies, the Treasury said in an e-mailed statement today. Interested parties have been asked to submit their views during a consultation period that runs until Feb. 17, with the government aiming to submit legislation in the next session of Parliament.

“The government is determined to build a banking system that supports Britain’s economy and its small and medium-sized businesses,” Financial Secretary to the Treasury Sajid Javid said in the statement. “The best way to deliver this is to increase competition in the sector and remove the barriers to new sources of finance.”

Prime Minister David Cameron’s government and the Bank of England have sought to spur lending to small and medium-sized businesses after the financial crisis led to a dearth of credit. While Britain’s economic growth has been gathering strength, business lending hasn’t recovered to the same extent as household credit.

If the rules are implemented, banks will be required to share their credit data on small and medium-sized businesses through credit reference companies, the Treasury said.

“Requiring banks to share data is an important part of creating a more level playing field that will enable more providers to enter the market,” Javid said.

Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable announced earlier this month that the government will provide an extra 250 million pounds ($410 million) to increase lending to small businesses through its so-called business bank, which will become fully operational in the fall of next year.

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