UK lenders call on government to support better data sharing to help SMEs access funding

Ellie Duncan
27 Jan 2023

Codat, Plaid, Allica Bank and TrueLayer are among a group of lenders calling on the UK Government to support an SME Funding Passport to improve data-sharing initiatives, as SMEs struggle to access credit.

In an open letter to Secretary of State for Business, Energy and Industrial Strategy, Grant Shapps, the lenders write that one of the biggest barriers to growth for SMEs is the difficulty in accessing funding, “with the Bank of England identifying a funding gap of £22 billion”.

The letter is co-signed by Codat, Atom Bank, Funding Circle, iwoca, Allica Bank, SPRK Capital, Recognise Bank, Plaid, Playter, OakNorth, Wiserfunding and TrueLayer.

They jointly wrote: “There are often too many barriers in place to lenders accessing up-to-date, accurate data on businesses to make informed decisions, and the application process for SMEs can be too complex and time-consuming.”

The letter refers to research that revealed 47% of SMEs in need of a loan are finding it difficult to get one and only 6% are satisfied with the current SME credit market. Meanwhile, 55% have had to take out a personal loan to fund their business.

“We are calling for the UK to build on the success of Open Banking and support the country’s small businesses through improved data sharing initiatives. Better data flow and accessibility between the financial tools used by SMEs and lenders is key,” they said in the letter.

They have urged the government to pass the Data Protection and Digital Information Bill, and make sure that it applies to data needed for SME underwriting.

“Our collective solution is the implementation of an SME Funding Passport,” the lenders wrote in the open letter.

“This is a digital file containing company financial data necessary for underwriting. The data within this digital file is consented, standardised, and easily shareable with lenders in real-time.

“This goes beyond just bank account data and includes relevant data from any of an SME’s connected financial tools, such as accounting software.”

The letter has also been supported by the Federation of Small Businesses (FSB).

Pete Lord, Codat CEO, said: “We in the industry are ready to drive the implementation of this progressive technology and legislative support from the government can play an important role in ensuring its success.”

Martin McTague, national chair of the FSB, said the SME Funding Passport has the potential to help small firms in their search for funding by simplifying the application process, saving them time and duplicated effort.

Listen back to a recent episode of Open Banking Expo Unplugged in which Gabby Macsweeney, Codat’s head of brand and communications, discussed the main findings from its report, ‘Open for business: the case for a new approach to Open Finance that works for SMBs’.