Written question asked by Chuka Umunna (Labour) on Thursday, 14 July 2011, in the House of Commons. It was due for an answer on Monday, 18 July 2011. It was answered by Mark Prisk (Conservative) on Wednesday, 7 September 2011 on behalf of the Department for Business, Innovation and Skills.

Business: Banks

Question: To ask the Secretary of State for Business, Innovation and Skills what assessment he has made of information asymmetries between small and medium-sized enterprises and banks.

Answer: It is widely recognised (e.g. the 2004 Graham Review) that market failures exist in small and medium-sized enterprise (SME) debt markets, where information needed by lenders to make judgments on individual loan applications may be expensive, or difficult to obtain. Although advances in credit assessment techniques may have helped to overcome these difficulties, barriers resulting from a lack of information may still be faced by certain types of business, in particular those that lack an established track record.This Department is aware that some businesses can encounter difficulties when accessing bank finance due to a lack of financial track record, or collateral. For instance, the SME Finance Monitor (July 2011) reported that, for SMEs whose borrowing requests were declined, the main reason given was lack of credit history or a poor credit history.In order to help viable businesses lacking a track record, the Government have extended the Enterprise Finance Guarantee Scheme, which is targeted at such businesses and those businesses who lack security.

Secondary information