The co-founder of one of the UK’s most successful equity crowdfunding site claims banks’ "vice-like grip" on SMBs will be broken by a measure announced in yesterday’s Queen’s Speech.
Under the proposed Small Business Bill, big banks will be forced to refer entrepreneurs and startups to alternative lenders if they refuse to provide loans.
The bill was one of several pro-business boosts announced yesterday, and CrowdCube co-founder Luke Lang said it would improve prospects for the UK’s startup scene.
He told CBR: "Plans to break the banks vice-like grip on SMB funding announced in the Queen’s Speech by forcing them to refer small businesses to alternatives sources of finance is welcomed.
"It is vital for the longterm health of the British economy that businesses get the start-up and growth finance they need and they have so far been starved of by bank lending."
CrowdCube, which allows investors to back various business ideas in exchange for equity, became the first such firm to break the £10m barrier last August after its 2011 launch.
It attributed its success, in part, to an "outdated" banking system that denies startups and SMBs the requisite funding to grow.
The Queen revealed in her speech: "’Legislation will be introduced to help make the United Kingdom the most attractive place to start, finance and grow a business. The Bill will support small businesses by cutting bureaucracy and enabling them to access finance."
CrowdCube’s own rise has been echoed by similar platforms like Seedrs, Funding Circle and MarketInvoice, while entrepreneurs can explore their options on alternativebusinessfunding.co.uk.
Edmund Truell, Group CEO of Tungsten, claimed the "old guard of lenders" are not serving SMBs well enough, saying: "Lending to SMEs by banks participating in the Funding for Lending scheme fell by £723m in Q1, and according to NESTA, demand for alternative sources of finance grew by 91% between 2012 and 2013 in the UK."
Other measures announced include the Small Business, Enterprise and Employment bill that requires larger companies to pay SMBs promptly for any work, as well as seeking to provide small firms with better access to £230bn worth of public sector contracts.
