Chancellor George Osborne will today unveil plans to improve access to credit for the UK’s freelancers, contractors and small businesses. Under new rules, which will form part of the Small Business, Enterprise and Employment Bill currently making its way through Parliament, High Street banks which refuse loan applications from small and medium sized firms will offer to refer their application to smaller banks and online alternative providers, such as the many financial technology businesses currently making waves in the City.

Firms such as MarketInvoice, Seedrs, Crowdcube, Rate Setter and many more have experienced a boom in business since the beginning of the financial crisis, as traditional sources of finance became more and more reticent to lend to risky businesses. Most of these alternative providers employ peer-to-peer models, acting as a platform enabling individuals and businesses to lend to one another.

Recent years have also seen the rise of several “challenger banks” such as Aldermore and Metro Bank seeking to break the near-monopoly over consumer and business banking currently enjoyed by Barclays, HSBC, Lloyds and RBS. The “big four” account for nine of every ten business loans, and around 85% of current accounts.

The new rules will be seen as a boost to these providers, and aims to increase competition in the business finance sector. Last month the Competition and Markets Authority recommended an investigation into business banking after it found that new entrants to the market face significant roadblocks, and the stagnation of competition in the industry meant that “there’s not enough rivalry”, and banks need to be “falling over themselves to serve the customer.”

The Chancellor will say at the launch of the new Innovate Finance body:

“It’s only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we will ensure Britain’s financial sector continues to meet the needs of businesses and consumers.”

Alongside the new lending rules, Mr Osborne will also announce that The British Business Bank, Vince Cable’s Government-backed lender, will be given an extra £100 million to invest in UK firms.

Photo by EpSos.de