Today’s SME finance monitor shows only 41% of SMEs seeking finance were confident the bank would lend to them in Q4 2017.  Nic Beishon, Head of Commercial at Equifax explains how the Commercial Credit Data Sharing scheme, a government initiative mandated under the 2015 Small Business Enterprise and Employment Act, will reshape the SME lending market:  

“There are millions of companies in the UK with fewer than 10 employees and many who apply for finance often have a limited credit history - this lack of available information makes it difficult for lenders to evaluate and underwrite loans.

“The Commercial Credit Data Sharing (CCDS) scheme, now live, seeks to stimulate competition and encourage new entrants in SME lending to address this financing gap. It covers not just the smallest UK businesses, but any company with a turnover of up to £25m - 99.9% of the entire UK business population[1].

“CCDS will open up secure sharing of detailed business current account data and up-to-date information on the performance of existing loans and corporate cards from the leading business banks. This data, now available, will help close the financing gap by giving lenders a more complete picture of a businesses’ financial health, in particular benefiting SMEs who only occasionally apply for finance. With an in-depth view on a borrower’s financial activity, banks and non-bank lenders will be able to offer SMEs more competitive loans.

“Access to CCDS data will also give lenders the ability to track a customer’s financial status, alerting them to potential problems with repayments, allowing lenders to identify an appropriate course of action early on. This will help them adopt lending standards introduced last year, better supporting SMEs in times of financial stress.

“This data sharing scheme has the potential to revolutionise how lenders evaluate loans, allowing them to make faster, more informed lending decisions. A healthy SME sector will help the UK economy flourish; combined with industry initiatives including Open Banking and the Payments Services Directive 2, CCDS will transform SME lending and facilitate growth in the sector.”

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For more details on the impact CCDS will have on SME lending, please click here

Equifax has also prepared a guide to CCDS explaining how it will work in practice, and how lenders can use this data to lend to SMEs.