More information on small firms' credit histories will be made available to banks to help increase access to finance, according to the government.
A pilot scheme by HM Revenue & Customs will see a ‘SME credit database’ being developed by sharing a company’s VAT payments data with credit ratings agencies.
This information will then be used by lenders – especially newer banks - to help them make more informed decisions about small businesses hoping to secure credit.
It is hoped the scheme will help to plug the gap in the lack of reliable credit information currently available on small firms, which can mean viable businesses are often turned down for bank loans.
A spokesperson for the Department for Business Innovation & Skills told BusinessZone.co.uk: "The pilot came about after [business minister] Michael Fallon wrote to the Treasury saying that this may be able to help with access to finance for SMEs."
An HMRC spokesperson added: "HMRC is working with government departments and other stakeholders to look at how it can contribute towards helping the SME sector, including greater tax transparency with third parties. However, no announcements have yet been made."
Professor Russel Griggs, the former head of the CBI’s small business council, told The Telegraph that the situation is particularly problematic for the smallest businesses.
“A lot of people don’t realise that in micro businesses, it’s you being judged, not the business. Your credit history as a consumer is actually as important as your business plan.”
He added that banks should judge a business separately to how they judge a consumer.
Prof Griggs is due to publish a report on credit scoring of small businesses this summer.