Why it is important: When we make better information available to smaller businesses, we help them make better choices about finance. This means they are more likely to invest, knowing that they have the right kind of finance for what they need.
The Bank has therefore measured the awareness of different finance options by SMEs through our annual survey, where we looked at the average awareness for six different finance products. This was 48% in our November 2015 survey, mirroring other evidence that awareness and use of providers other than their main bank amongst smaller businesses is low.
We know from our research that around 60% of SMEs only contact one provider when looking for finance – generally their own bank – and around a third of these will cancel their plans if they receive a ‘no’. We need to make sure that as many businesses as possible become not only aware of, but confident in the wide choice of supplier and finance options available to them.
To increase awareness of finance options for smaller business, we jointly published a Business Finance Guide with ICAEW’s Corporate Finance Faculty, with contributions from a further 17 partner organisations representing the finance and business sectors. The guide was updated in August 2015. For the new edition and digital version being published in early summer 2016, we have been working with four additional partners to provide additional input and reach, levering our convening capability to bring together an unprecedented spread of organisations for a venture of this nature.
Researching our markets
Our other reports provide more detailed analysis. For example, the Small Business Equity Tracker analysed the continued growth in volume of equity finance, but also drew attention to regional imbalances, with London-based small businesses receiving the largest share of equity finance.
We work with a range of research partners, including this year Goldman Sachs and the Enterprise Research Centre on ‘Unlocking Productivity: Internationalisation and Innovation in SMEs’ which highlighted the important role that SMEs can play in closing the UK’s productivity gap.
Improving finance markets
To help overcome information asymmetries faced by smaller lenders, we have advised HM Treasury on the designation of Credit Reference Agencies (CRAs) which can share SME credit data for the benefit of a wide range of banks and lenders. HM Treasury announced the three designated CRAs at Autumn Statement and the system went live in April 2016.
We have also advised HM Treasury on the designation of Finance Platforms to refer SMEs who get rejected by the larger banks. The finance platforms seek to match alternative sources of finance from a broader range of lender. The first three platforms were announced at Budget 2016, and the system will go live later in 2016.