THE FEDERATION of Small Businesses (FSB) has called for the government to boost the resources it gives to the British Business Bank so firms can access better information on alternative sources of finance such as peer-to-peer lending.
A report by the trade body, titled ‘Banking Small Businesses: Forging closer ties between banks and the real economy’, found mainstream lenders often focused on bigger business while small firms miss out on advice and finance.
The report warns that many small- and medium-sized enterprises (SMEs) remain unaware or wary of alternative finance options, with respondents expressing concerns that P2P lending has not been tested through the economic cycle and that the sector remains “worryingly unregulated.”
To address the lack of awareness, the report suggests establishing a British Business Bank Small Business Interactive Advice Platform that includes P2P advice and allows SMEs to exchange information about key challenges they face.
The research also suggests the British Business Bank should be given more support to collect data on P2P lending and provide advice on options in the sector.
The trade body also calls for all banks to issue standardised lending contracts to small firms, making it easier for them to compare indicative offers between banks, alongside one-page summaries of deal terms.
“We need to create an environment where small businesses are fully aware of all the finance options available to them and understand exactly what they’re signing-up to when they take out a loan,” said Mike Cherry, national chairman of the FSB.
“Information asymmetry is, quite simply, bad for business.”
Read more: The SME’s guide to P2P
Read more: High street banks are failing small firms