BBA submission on the Government s Consultation SME finance: help to match SMEs rejected for finance with alternative lenders

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1 BBA submission on the Government s Consultation SME finance: help to match SMEs rejected for finance with alternative lenders The British Bankers Association (BBA) is the leading association for the United Kingdom banking and financial services sector, representing over 200 banks, which are headquartered in 50 countries and have operations in 180 countries worldwide. The BBA welcomes the opportunity to respond to Government s Consultation SME finance: help to match SMEs rejected for finance with alternative lenders and to build on the on-going dialogue that we have had with the government on this. We look forward to continuing to work with you closely in this area and will be happy to meet with you in the coming weeks to progress matters. General Comments The BBA understands the objectives behind the proposals in the consultation and we support the overarching goals of the proposals in the context of responsible lending and the desire to ensure businesses when declined finance - by any provider - are given a choice of an alternate route or alternate support. The BBA also fully endorses having a competitive finance market for businesses and the diversity of this market place is exemplified by 500 plus business finance providers listed on the BBA supported betterbusinessfinance.co.uk, as well as the growing number of banks offering business services. We also support the on-going work the government is undertaking on the regulatory framework to support new market entrants and maintain regulatory proportionality. The banking industry is committed to encouraging competition within the sector in order to benefit businesses through product choice and improved customer service. The Bank of England s Bankstats (Monetary & Financial Statistics) February 2014 reveal that over 170bn of loans and overdrafts were made to SMEs. BBA statistics show that the top 7 banks were responsible for 100bn of these, demonstrating that additional players in the SME financing market are giving businesses a greater choice of lender. This has been helped by the increased pace at which banking licences are being granted, providing greater competition to the more established banks. Levels of alternative finance are growing. Invoice discounting is growing at 20 per cent per year and peer-to-peer lending is growing at 100 per cent per year, according to the Asset Based Finance Association. The latest SME Finance Monitor reveals that 17 per cent of those interviewed used alternative sources of finance in Q4 2013, compared to 15 per cent in the same quarter of the previous year. However, UK businesses have a traditional overreliance on bank finance with banks providing nearly 80 per cent of all credit. For example, only 3 per cent of SMEs use equity finance in the UK compared to an EU-wide average of 7 per cent, far behind Denmark and

2 2 Sweden where equity investment accounts for 46 per cent and 31 per cent of SME financing respectively. The banking industry, through its Better Business Finance programme is working with alternative finance providers to ensure businesses can get the right finance at the right time. Partnerships with institutions such as the UK Business Angels Association support start up and early stage companies. The bank-backed Business Growth Fund, provides fast growing businesses a capital boost of up to 10 million. To date, the bank-financed fund has invested nearly 265 million in British businesses across a broad range of sectors including energy, retail and hospitality. Furthermore, through mentorsme.co.uk and the bank mentoring programme, thousands of businesses are given vital support as they seek to develop and grow. The banks also continue to work with government on support schemes to develop alternate (non-bank) sources of finance. Both in the Budget and the recent consultation on the Enterprise Finance Guarantee Scheme looking at how it could be extended to more specialist finance providers. In addition the major four banks have agreed a voluntary protocol for handing deeds of priority and waivers to make it as efficient as possible for businesses seeking alternate finance. The industry also fully supports the sharing of credit data between finance providers - a practice banks have been engaged with for some time under the existing rules of reciprocity - and which will be further enhanced in the forthcoming legislation which the banks support. The banking industry believes it is vital that businesses know the choices they have when seeking finance and that is why such so much has been invested in road-shows, clinics and roundtables in order to educate businesses on their range of finance options. These are usually undertaken in partnership with alternate finance providers and business groups and help businesses think about the differences between equity and debt, invoice finance and an overdraft, asset finance and term loans. Several hundred of such events have been held in these past 2 years and it is encouraging to see the understanding of the diversity of finance emerge, as evidenced in the SME Finance Monitor. The UK banking industry is also one of the most transparent in provision of lending data since the introduction of post code lending statistics in This offers a picture of what is happening where and when, and provides an opportunity for competition to thrive and evolve. When it comes to signposting and referrals all of the major banks are committed to the principal of signposting and referring SME customers to relevant alternative sources of finance where this is more appropriate than traditional bank finance. This takes place when a customer is viable, but does not meet the credit requirements of the bank and has been declined bank finance, or is a business requiring signposting to business support/ advice which the bank is unable to provide. This activity sits alongside the appeals process. Already the banking industry has many local and regional partners with whom it works to help businesses access finance when the proposition is not right for the bank. These arrangements co-exist against the backdrop of a bank s obligation to lend responsibly and customer duty of care. These bilateral partnerships, which banks will continue to develop, cover specialist financiers such as asset based lenders; the Business Growth Fund; Start Up Loans, peer to peer lenders; Community Development Finance Institutions etc. The industry also has many relationships with brokers and accountants where the signposting of the customer to a local broker or accountant is undertaken to help the customer structure the opportunity and assess alternatives.

3 3 In addition, the major banks, through the BBA operate a referral portal with Community Development Finance Association and its key members Institutions which is now piloting with the Start Up Loans Company and is intended to expand in This operates through central points to ensure it is steam-lined and operationally effective. Banks will continue to use these existing mechanisms as a key method of signposting/referring viable businesses to alternate support. Any further government- backed signpost proposition as outlined in the consultation must therefore be complementary and additive to existing private sector activities, which should also continue to sit alongside the appeals service which banks will continue to offer and be focussed on the area of greatest need. Whilst these voluntary arrangements exist, banks are also supportive to a mandatory requirement to signpost/refer which would occur at the point of decline but this must be set at the right level and recognise the regulatory obligation on banks to lend responsibly to businesses that can afford finance and also the need for a bank to adhere to its duty of customer care. It is important to make a distinction between signposting and referral. When a business is signposted they are pointed towards sources of information and it is then their responsibility to follow this up. When a business is referred, the bank takes on responsibility for facilitating initial contacts between the person and the referral point or for passing details on to a third party. A mandatory requirement will need to articulate the parameters under which a customer will be handled and have customer choice at its heart. Any government backed initiative will also need to be practical to implement and should not in any way end up supplanting direct engagement between a finance provider and a business or lead to the unintended consequence that every business expects to receive finance as this may not always occur. When assessing the context of a further signpost proposition it is also worth noting the insight the SME Finance Monitor provides on businesses seeking finance and those not successful, which reflects that returning borrowers are largely successful in attaining finance whilst first time borrowers with no track record have the greatest difficulty. On the basis of this any additional signposting and referral process could primarily be concentrated on the first time applicant sector or for the smaller enterprise. As these are mainly young firms, which have never borrowed and may not have an accountant etc. In addition the size of finance is worth noting - the SME Finance Monitor assesses the median of this to be circa around 5,000 to 14,000 dependent on product type. The existing signpost and referral programme covered by the banks existing regional and local activities and the processes the major banks have in place for the Start Up Loans Company (now piloting) ** and the Community Development Finance Institutions, could be expanded to engage a government backed centralised process exchange working alongside the broker and accountant community. This could be a government sponsored portal that would act as an open marketplace for those seeking finance and providers. Such a portal would have the advantage of being open to all SMEs. Banks and other lenders could then simply refer declined customers to this portal. Many of the UK banks believe this exchange could be potentially managed/ overseen by the British Business Bank. Alternatively it could be achieved by creating a virtual network through a core group of associations to include the National Association of Certified Finance Brokers and new Alternate Business Funding platform. The UK has a very vibrant finance broker community under the umbrella of the NACFB which has approximately one thousand experienced commercial finance individuals as members spread right across the whole of the

4 4 UK, offering a wealth of knowledge that is available to all businesses. These brokers very role is to work with businesses seeking finance which cannot gain funding or have lost funding through traditional sources and the NACFB could be a natural exchange interlocutor. An alternative may also be to consider what role the Credit Reference Agencies (CRAs) may play. Such a process should operate under the guiding principles outlined in annex 1, with customer choice and consent at its heart. SME customers must give specific permission to be referred on and for their data to be shared, so as to comply with any privacy concerns the business customer may have. In addition we would expect a customer to be allowed a period of response to such an option i.e. in keeping with appeals, and other experience, of at least 30 days. A customer should also have the right of removal from the platform, and in accordance with data protection law the data should be held only for a set period of time. We view 90 days as an acceptable time for which a business to be contacted by an alternate provider. The following section provides detailed responses to the specific questions raised within the consultation and suggests ways in which matters may be taken forward with a government backed exchange. We look forward to progressing dialogue with the government on this matter in due course. 1. Do you agree that the government should create a mandatory process, as outlined above, to help match SMEs that are seeking finance with credit providers who are looking to offer finance? The major banks are committed, as outlined in annex 1, to referring viable businesses customers who are not suitable for bank finance to alternate providers. Such mechanisms already exist, are being utilised and are operating to support viable businesses to have choice, whilst upholding responsible lending requirements. We also are supportive of a mandatory requirement being made in legislation to explicitly require a referral programme to be put into place at point of facility decline, whilst recognising customer consent and responsible lending obligations. In this regard we would stress that: i) a mandatory process should not force customers into one referral route only, which could have the perverse effect of stifling customer options, stifling innovation or lead to the unintended consequence that contradicts the affordable and responsible lending criteria currently laid down in regulatory and consumer legislation. ii) the government has to be mindful that there is a vibrant and growing business finance sector in the UK which is continuously evolving. iii) the government has a responsibility to ensure it recognises that not always is every business viable for finance. Any mandatory approach should therefore not lead to a business expecting it has an automatic right to always accessing finance as experience has shown for example in the CDFI referral programme that this will just not be the case. iv) a mandatory requirement needs to apply to all finance providers; have customer choice and consent at its heart and ensure it does not perversely curtail private sector activity of current business practice. It should be set at a high level e.g: it is mandatory that all finance providers have a referral programme in place for SMEs rejected finance and that businesses be given the right, under their specific permission, of being passed on to an alternate provider. One option for such will be a government supported exchange.

5 it will be necessary for any legislation to provide definitions of certain aspects of the lending process such as an application, a decline and an SME/eligible business Should any requirement to share information on rejected loans apply to all SME credit providers or should there be exemptions for smaller providers and/or providers without a banking licence? Yes a requirement to share information on rejected loans should apply to all SME credit providers as the overriding government principle here should be about giving a SME choice. It should include all finance providers as there is not one single finance provider today that will always say yes to every business that approaches it for finance as evidenced by decline rates from both traditional and alternate finance sources. The reason one provider cannot help a business may be as a result of product breadth; or risk appetite at a given time but just because one entity says no does not mean another will but this must apply across the board to ensure all customers are treated fairly no matter the finance provider. 3. Do you agree that information about rejected SME loans should only be shared where an SME gives its permission? Yes, information about rejected SME loans should only be shared where the SME gives its express permission. This is critical when set against the context of the current regulatory regime and framework and data protection rules as well as the need to ensure the business customer has a choice and is not forced down a route it may not support or wish to follow i.e. for good reason a customer may not wish to be referred on to an alternate finance option. Business customers must be invited to opt in to the referral process and be aware that the bank is not making any recommendations. A customer must also have an opportunity to make a decision of referral in a given time period e.g. 30 days and not be pressed to make an immediate decision. It is also essential the business knows and consents to the information provided see below An example of how this works for customers with the Start Up Loans Company today under the BBA programme is attached in annex 3, which is a methodology also deployable to a government backed exchange. 4. Do you think there should be additional protections in place to secure the data about rejected SME loans and what form would these take? It is very important that a referral process does not inadvertently affect the business credit rating because as a consequence it creates a credit footprint with multiple providers that causes concern, for example, there is a risk that a customer is rejected by multiple providers of finance in quick succession and this causes the risk that a company s credit rating is negatively impacted, causing them to not be able to obtain future finance. In addition we think it is very important that any information on why the SME has been declined by the referring finance provider is not passed on. This is to stop any prejudicing of the outcome that the new finance provider may have. It is also essential that the holder of the data can be entrusted to keep the data secure at all times. We would suggest that data holders are accredited by government or a regulator. The customer should have the ability to ask for the information held on file and for the data to be removed.

6 6 We also believe that, in accordance with Data Protection law, the data should only be held for a limited amount of time. In our view 90 days would be sufficient to ensure the business is contacted by alternative lending providers. 5. What information do you think banks rejecting SME applications for finance should be required to provide? Do you agree that this should include information about the SME s name, business type, and loan request parameters? Fundamentally the information passed on must have customer consent; be agreed by the customer and be restricted to: i) Business name ii) Business address iii) Contact number/ iv) Amount of finance requested v) Business legal structure 6. Do you think there other types of finance applications that should be included in addition to SME business loan applications? If you think other types of finance applications should be included, please supply the reasons for your answer. Yes, as with existing bank referral and signpost programmes, we do believe additional forms of debt and export finance can be supported other than just business loan applications. The banking industry today also signposts/ refers customers on to alternate finance providers support when reviewing the following types of facilities: -Working capital facilities -Term loans - Asset Backed Finance - Export Finance (working with UKEF and UKTI) The referral programmes must be able to match each type of finance with the most appropriate providers of that finance. It is important that a customer s needs are considered when deciding what an alternate source may be and that is why a range of partnerships currently exist and why choice and range is necessary, rather than forcing one mandatory route to be used. Exclusions should also however apply, such as: i. In order for a potential client to be referred the customer must not be in financial difficulty (definition to be agreed); or fail AML / KYC / policy rules (e.g. Sanctions) during the course of assessment by the original finance provider ii. iii. any existing lending is not already subject to formal demand or enforcement or legal proceedings The business is not viable or could not service additional debt given its existing debt commitments

7 7 iv. small short term temporary facilities 7. Do you agree that information about SMEs rejected for finance should be referred on to private sector platforms? If you agree, how would this work alongside existing private sector referral arrangements? In the first instance it is important to recognise that platforms already exist to support referral programmes and these are already in use e.g. (NACFB; AFP; CDFI): and being expanded upon, with the banking industry actively engaged in these discussions where businesses are not suitable for bank credit. It is important that these arrangements that already exist are not disrupted, and that it is not dictated that only one certain type of route of referral takes place, as this has the potential to limit customer choice. If the government wants to set up a complementary platform, then many of the UK banks believe the British Business Bank could play a role with this/ be an oversight vehicle to it. It is important that whatever is set up is complementary to the existing landscape, is government backed and is centralised. Annex 2 sets out how a government backed exchange could operate in practice. This could leverage existing government or private sector activity (e.g. NACFB; CRAs).. The benefits of one central government backed exchange are: It is neutral to finance providers It gives confidence to businesses It has existing brand value It negates regulatory uncertainty Its ownership is stable It has longevity/scale and solid bona fides 8. What factors would promote the development of a market of competing platforms? As highlighted above there are many platforms, and processes that already exist in this space, whether these be through brokers, accountants, alternate lenders, or BBA portal, alongside bilateral partnerships. These are private sector led and developed and will continue and indeed already compete. Any further government backed central exchange/ platform needs to be additive and complementary, not supplant existing arrangements. Equally however there has to be practical and manageable implementation i.e. a bank cannot be in a position where it is mandated to refer a business to every finance provider or platform developed as this is impractical and inappropriate for the customer. It also must sit at decline stage and therefore after evaluation of the business requirement has been made by the original provider of finance. 9. If you agree that rejected loan information should be referred (to a platform, or somewhere else), how do you think compliance with this requirement should be reported and then enforced?

8 8 The monitoring of whether businesses are been referred by banks is already captured as part of the appeals initiative that has been put in place by the BBA and is monitored by an independent process. We also gather data through the BBA referral portal. However, ultimately the referring of customers must be down to customer consent and choice. If after an initial offer of referral is made a customer decides not to pursue it is customer choice, we therefore do not believe this should be enforced and should not be marked down against the finance provider. Of even more importance will be for the exchange to maintain a log of the applicant progress through the referral process and be able to accumulate information of market gaps / failures /horizon scanning/ investment readiness to help guide and develop future policy interventions. 10. What criteria should be used for designating platforms? How should ongoing adherence to these criteria be monitored? It is important that the private sector finance providers have choice as to who they work with and the government should not dictate platforms to be used although the government could consider the complementary creation of a new government backed exchange platform, as outlined in annex 2 which acts as a complementary process to existing platforms. Overall when the banking industry considers entities to partner with the following criteria have been applied: i) The provider is either regulated by an official regulatory body such as the FCA or ii) self- regulated by being a part of an industry association with set codes of conduct iii) will enter into SLA covering service arrangements iv) has a risk management framework v) provides finance to SMEs vi) has a track at least 3 years of operation, or is government backed 11. Do you agree that all of the information that is made available should be accessible to all providers of SME credit? Do you agree that the information should also be available to commercial finance brokers, accountants and advisers? Yes all recognised (either by regulation or recognised association membership) SME providers of SME credit should have access to the information including all banks. Although it should not become a defacto channel for business leads and supplant direct engagement. Furthermore, customer consent is the key to whether their information is shared with other parties such as accountants and advisors. It must be very clear that a customer has given consent to have their information to be referred on, and the customer must also be clear as to what the information will be used for and to whom. Neither should the passing on of the information constitute a recommendation from the referring entity. An example of how this works for customers with the Start Up Loans Company today is attached in annex 3, which is a methodology also deployable to a government backed exchange.

9 9 12. Are any additional protections and reporting requirements or restrictions needed to ensure SMEs are protected from issues such as poor advice, malpractice and misselling? A referral process should not be deemed by regulators to be giving advice or selling and the banking industry would want assurance on this matter from the regulators. As such we believe additional protection for all concerned would be for the FCA to give assurance that they are happy with the procedures and responsibilities that finance provider has and that when a customer says yes to a referral the finance provider s obligations end. In order to ensure no malpractice by the referred finance providers they will have to be regulated in the normal way by the FCA or another regulator. The referral process should be included with the scope of the Financial Ombudsman. In our view, if lending is undertaken as a consequence of a referral by an alternative lender, the SME would be protected under existing legislation. Concluding comments As stated, the BBA is supportive to the principal of signposting and referring SME customers to relevant alternative sources of finance where this is more appropriate than traditional bank finance, when a customer is viable, but does not meet the credit requirements of the bank and has been declined bank finance, or is a business requiring signposting to business support/ advice which the bank is unable to provide. Many private sector led initiatives and bilateral arrangements already exist in this regard, but banks are also supportive to a mandatory requirement to signpost/refer on at point of decline providing this has customer choice at its core; is applicable to all finance providers and recognises the regulatory obligation on banks to lend responsibly, with a duty of customer care. Any further government- backed signpost proposition as outlined in the consultation must therefore be complementary and additive to existing private sector activities, which should also continue to sit alongside the appeals service which banks will continue to offer. Any government backed initiative also needs to be practical to implement and should not in any way end up supplanting direct engagement between a finance provider and a business. In our response we have provided some ideas of how this could operate and look forward to progressing this further with HMT and the government in coming weeks. British Bankers Association

10 10 Annex 1 Over-arching Principles on signposting and referrals 1. It is important that the private sector relationships that banks have in this area are allowed to develop and continue outside of any new exchange and any referral principles are driven by the private sector in partnership. 2. A referral will always be subject to the banks assessment with the client of their need and will be made subject to customer consent. 3. At no point can the referral be deemed advice by the bank. 4. The signpost and referral process to a new form of exchange should be agreed by the FCA and recognise that in so making a referral the bank s obligations to the business customer ends at the point of referral and there will be no retrospective review of the bank s actions. 5. The referral option will sit alongside the right of appeal i.e. a customer will still have the right of appeal and additionally an option of referral but the customer will chose what it does. 6. Each bank will establish its own process and programme, based against the principles outlined, which will be monitored. 7. Sign-posting of the customer to alternate sources will cover relevant business forms of finance related to working capital facilities; loans; asset backed finance; and specialist finance e.g. equity or export finance. 8. The bank will highlight the options to the customer through its communication with the customer. In each of the major banks the bank will have the choice to refer/link the business to an entity it already has a direct partnership with or : or, as an additional and complementary option, when appropriate, to a government backed clearing exchange/network which potentially the British Business Bank could operate or another government backed private sector entity could house, which would review or showcase the business need and finance options. On a private sector basis potentially the National Association of Brokers or CRAs could operate and link off to others e.g. the Alternate Finance Providers - see section 3 for an outline of how an exchange concept could operate 9. In certain instances the customer may need further help in developing their idea. In these instances the business may be put in contact with a mentor or professional advisor which may be more appropriate. For a mentor the business will be signposted towards organisations that are a party to mentorsme**; and for the advisor/ accountant the business will be signposted to those that are part of a recognised accountancy practice/partnership/ programme (e.g. BAS service**). This can be undertaken through signposting by the bank, or the exchange. 10. It is important that the private sector relationships that banks have in this area are allowed to develop and any referral principles are driven by the private sector in partnerships.

11 Any government backed exchange should play an additional and complementary role for those banks preferring a centralised functionality or backstop option but it should not replace the private sector existing partnerships or arrangements. 12. Where relevant, the BBA centralised referral platform can be utilised and could be the channel the major banks use to connect to the clearing exchange / network. The BBA portal is up and running with 4 major banks; has had extensive user testing; penetration testing and is flexible.

12 12 Annex 2 Outline of how a Government backed clearing exchange concept could operate in practice - connecting the finance and advisor landscape - which as an option could be overseen by the British Business Bank: Outline process governing the signposting and referral process to a government backed clearing exchange and how it could operate in practice A. General Governing Principles 1. All finance providers should, in principle, be able to participate in the referral /signpost options 2. Participating finance providers can agree to: a. Send information (referral) into the exchange only; or b. Send information into the exchange and opt to also receive referrals c. as an accountant or broker# be registered with the exchange to receive information only to then work with the business to source the relevant finance # most appropriately drawn from NACFB membership given the brokers will be subject to the NACFB accreditation and CCA licence process which is important; as is ICAEW,ACCA, ICAS membership for accountants 3. All recipient finance providers will be pre-agreed; be listed on the BBF (betterbusinessfinance find finance tool and a member of a nationally recognised finance association and /or FCA regulated 4. Detailed operation against the below outline process and parameters will be dependent on the individual business model of the referring institution 5. This exchange will work alongside other types of day to day referral/signpost mechanisms that banks employ and is not designed to have targets set against it but rather is an additional and complementary service for business and will leverage Business Finance Advisors; Brokers and local support as relevant 6. The exchange signpost and referral mechanism, must explicitly be supported by the FCA and regulatory requirements 7. any signpost and referral will be determined by banks and customer choice and only actioned when a customer chooses to do so B. Outline Process 1. A business (or applicant ) approaches a business finance provider for finance. 2. When approached the business finance provider conducts business in the normal manner and makes an assessment of whether finance can be provided to the business. 3. At the point at which the business finance provider concludes that they are not able to provide the finance, when appropriate, the business finance provider will determine the best route to signpost/refer the client to alternative funders which may be to use its existing

13 13 signposting/referral mechanisms or it may be to offer the applicant the option of a signpost / referral to the exchange. Note: Where a Business Finance Taskforce bank declines the applicant finance the bank will also advise the business of the right to appeal, the option of the applicant for a free bank mentor and the option of the applicant to be referred into the existing CDFI or current Start Up Loans Company** through the BBA referral portal. The BBA referral portal can also be the route into the exchange 4. Upon receipt of the applicant info the exchange could make an initial review of the business needs/ request and undertake the following: Option 1 the business is given a summary report covering the following for it to choose it s next step Where an existing government scheme is in place that may be able to support the application for finance and has not be offered or considered by the referring finance provider (most likely because the finance provider is not able to access the scheme) the exchange will highlight the scheme It will also highlight the alternate private finance providers in the area of relevance And it will provide a list of i) Accountants (via ICAEW or ACCA or ICAS) who are part of the Business Finance Advisor network who can work with the business in helping the business develop an appropriate finance proposition ii) the local Finance Broker (s) (through national associations) that could also work with the business to locate finance options iii) the local UKTI/UKEF Rep if relevant or Option 2 Alternatively (or additionally), the exchange operates a platform whereby the business/ organisation referred is listed onto it by locality with highlights of the finance request and agreed recipients view the listing and decide directly which businesses they wish to directly connect with as a finance provider and connect to the business directly or Option 3 Undertake a combination of both option 1 and 2 5. The exchange will maintain a log of the applicant progress through the referral process and be able to accumulate information of market gaps / failures /horizon scanning/ investment readiness to help guide and develop future policy interventions C. Benefits of a government backed exchange: It is neutral to finance providers It gives confidence to businesses It has existing brand value It negates regulatory uncertainty Its ownership is stable

14 14 It has longevity/scale and solid bona fides Note: ** = as in existence and named today D. Referral Parameter Principles: these will be subject to change dependent on referring institution business models Type of businesses: Small and medium sized enterprises Social enterprises and community groups Products in scope to be referred: -Working capital facilities -Term loans - Asset Backed Finance - Export Finance Loan size to be referred (this is the base line principle - referring institutions will vary according to business model) : Up to each referring entity but likely to be a minimum of 1,000 E. Restrictions: i. In order for a potential client to be referred the customer must not be in financial difficulty (definition to be agreed); or fail AML / KYC / policy rules (e.g. Sanctions) during the course of assessment by the original finance provider ii. iii. iv. any existing lending is not already subject to formal demand or enforcement or legal proceedings The business is not viable or could not service additional debt given its existing debt commitments small short term temporary facilities F. SLAs: A clear SLA will need to be developed with roles and responsibilities defined and reporting methodology- sample to follow, Note: ** = as in existence and named today

15 15 Annex 3: Sample exchange with customer under the BBA Referral system. Dear X business Further to recent discussions you have the option to be referred to the Start Up Loans Company by X bank It is up to you whether or not to go ahead with the application. The Start Up Loans Company is a government funded initiative that provides start up support in the form of a repayable loan together with a business mentor for entrepreneurs across England, Scotland, Northern Ireland and Wales. Click here to access your application. Important notes You can find out more information about the Start Up Loans referral scheme here. Your security is naturally one of our biggest concerns, so we do everything we can to keep your details safe. This option of referral is your choice and does not represent a recommendation.