UPDATE: An APR for small businesses seeking funding has been confirmed by the Competition and Markets Authority (CMA) -
Figure 16.1: Measures to increase transparency of the cost and eligibility for SME lending
"We have decided to make an Order requiring all lenders that provide unsecured loans and overdrafts to display on their websites rates showing the cost of these products up to the value of £25,000. These rates must be displayed in a form used under the exisiting (personal) consumer credit regime. This includes:
(a) showing a representative annual percentage rate (APR) for unsecured loans; and (b) an effective annual rate (EAR) for overdrafts to enable SMEs to make comparisons on the total cost of credit."
Growth Street CEO, James Sherwin-Smith, spoke to Share Radio live this morning on the latest Competition and Markets Authority (CMA) announcements and how he hopes the outcome with benefit small businesses.
Today, the CMA has unveiled a package of measures to: 'shake up retail banking for years to come.' Included are hopefully the answers Growth Street has been seeking since launching theAPR4SMEs campaign earlier this year.
James Sherwin Smith stated: "This is a positive step forward, there is a desire for greater comparison. A simple, practical measure like an APR can drive a lot more transparency in the short term and make a meaningful difference straight away."
We hope to see small businesses benefitting from the CMA's proposed changes soon.
Key Highlights of the Share Radio interview include:
- The 14 separate remedies which have been included in the CMA's proposal package.
- Customers should be allowed to make better and more informed choices. This can be achieved by giving small businesses more information on quality of services - allowing them to question: is this service as good as it should be?
- Customers should be able to measure all factors objectively, as it is difficult to make a rational choice based on the limited information provided.
- There should also be a real focus on switching accounts, allowing customers to gain access to their historical data from banks that they may already hold a current account with. Banks should allow customers to extract information on themselves, and use that information when looking for a better deal by other providers.
- Small businesses do not have access to information which would allow them to match their financial needs, with products on the market
The APR4SMEs campaign:
- Consumers are used to seeing comparison markets and an APR on financial products, small businesses do not get the same privilege.
- CMA stated that they found it difficult themselves to draw any conclusions on what small businesses will actually be paying on financial products, showing yet again that there is an urgent need for more accurate pricing.
Updates later today.
- A mandatory APR for small business finance providers.
- Developments of a comparison service for small businesses - a way to bring transparency.
- Delivery of an eligibility tool for small businesses.
For further information, you can find the CMA's Banking Remedy Map here.
You can find Growth Street's campaign journey for an APR4SMEs here.
You can listen to James Sherwin Smith's interview with Share radio here.