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Adjudicator to highlight poor small business loan decisions

Adjudicator to highlight poor small business loan decisions

The government intends to set up an independent body so that small companies can appeal against banks that refuse to grant them a loan.

In last week’s budget, the Chancellor said that Lloyds and RBS would be forced to provide an additional £94bn of new lending and that half of that would go to SMEs.

The Credit Adjudication Service will examine lending decisions and decide whether or not they were made fairly. This should come as a big help to recruiters, umbrella companies, and contractor accountants who currently cannot challenge the decisions made by the banks.

The new service would fast-track complaints and its judgements will be legally enforceable. Mr. Darling has set aside £5 million to pay for the scheme in 2010-11 but there has been no provision made for funding it in the following two years.

The banks however aren’t too happy at the prospect of the new service. They believe that it is a bureaucratic nuisance and removes the right of companies to decide who they wish to conduct business with.

SMEs on the other hand welcome the move especially as around 20% of them are dissatisfied each year with lending decisions made by banks.

Alistair Darling also expects to see more competition between business bank accounts that will benefit SMEs as both Lloyds and RBS had to sell some of their high-street branches thus allowing other financial providers to step in.

The Chancellor has also guaranteed that everybody in the UK will be able to open a basic bank account. Up to a million people will be able to benefit from this move.

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Image: It Could Be You by left-hand

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