Britain’s major banks have removed red tape that meant businesses often had to wait months to secure loans from alternative finance providers.
Royal Bank of Scotland (RBS), Lloyds, Barclays and HSBC have introduced common standards meaning it will take no more than seven working days to process applications allowing rival lenders to secure loans against businesses’ assets.
When a business takes out loans with more than one lender, using their property or other assets as collateral, the lenders must agree a “deed of priority”, which determines who would be first to seize the business’s assets in the event of a default.
Previously, it could take several weeks or months for a bank – the original creditor – to process the paperwork, meaning a backlog of requests holding up loans from alternative lenders such as challenger banks or peer-to-peer lenders.
However, the UK’s four biggest banks have now implemented public standards for deed of priority requests, after an agreement to do so was announced during March’s Budget.
This is expected to make it easier and faster for businesses to secure loans with rival lenders, providing a shot in the arm for the economy as corporate lending continues to decline.
Figures last week showed that banks using the Bank of England’s Funding for Lending Scheme – which include Lloyds, RBS and Nationwide – cut lending to small businesses by £128m in the third quarter of the year.
“We want to make sure businesses trying to get a loan have certainty on security arrangements as quickly as possible so we are really pleased the banks have now implemented the agreed protocols,” said Irene Graham, the executive director for business finance at the BBA, the banking lobby group.
“Public standard documents should speed matters up for new lenders.”