New measures have been introduced to help small business owners switch current account, understand the lending market and obtain financial records from their bank.
The changes, part of the open banking package of reforms led by the Competition and Markets Authority (CMA), have been designed to make banking more competitive and create better access to finance for small business owners.
As of 2 February 2017, the following three procedures will get banks working harder for business customers: a standardised account switching procedure, the right to financial records and a new loan price eligibility tool from four high street lenders.
Commenting on the measures, Adam Land, senior director at the CMA, said: “The changes we are requiring from today make it easier for small firms to switch to another bank for their current account or to obtain a loan.”
Switching current accounts
According to CMA research, only four per cent of business customers switch to a different bank account in any year. The body predicts owners could save £80 a year on average by shopping around for a more suitable account for a different lender.
Under new procedures, all business current account providers will be adopting a Standard Information Set – the information required by banks to open a new business account – to simplify the switching process for owners.
The standardised information set will be available on the UK Finance website.
Loan eligibility tool
The new loan price and eligibility tool, available from Royal Bank of Scotland, Lloyds, HSBC and Barclays, is designed to make it easier for small business owners to understand the costs of taking out a loan and help them find the most suitable option.
The tool will cover all unsecured loans and standard tariff unsecured overdrafts up to £25,000.
The final measure targeting the pain points of business banking customers is the right to five years of transaction history.
After the CMA found that losing all financial records was a key reason people resisted switching accounts, banks will now have to provide business owners who are closing their account with transaction history from the past five years, free of charge.
As with the standardised information set, it’s a move designed to encourage switching bank accounts.
Land added: “These new rules, which are a result of our recent retail banking investigation, are part of a wider package that will help people to get the most out of their banks and force them to work harder for their customers’ money.”
Sign up to our newsletter to get the latest from Business Advice.