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Industry Chief says SME adjudicator doomed to fail

1 April 2010

The role of the Small Business Credit Adjudicator (SBCA) that was announced in the budget, has been called into question by the CEO of the ICM, Philip King.

The SBCA will hear cases referred by Business Link’s Financial Intermediary Service, where a business may have been unfairly denied credit.

Advising on the role of the SBCA will be a task force launched by the Department for Business (BIS), comprising Lord Sugar, Enterprise Champion, John Wright, outgoing Federation of Small Business Chairman and Mike Fairey, former Lloyds TSB Deputy Chief Executive.

Philip King, Chief Executive of the Institute of Credit Management, comments: “This looks like more policy being decided on the hoof with as yet no real thought as to the practical implications to small businesses.

“Why are we trying to create a process, with ‘roles and responsibilities’, when the concept is potentially flawed?” He adds “It is unlikely to improve the flow of credit to small businesses and is more likely to damage what can often already be a fragile relationship with the banks.

“For it to have a chance of working, businesses will be required to provide more financial information, not less, at a time when the EU has voted to reduce the burden of reporting on micro entities and the government may well follow suit.

“Banks make commercial decisions on the information that is available to them. If we improve the quality and accuracy of that information, we improve the quality and accuracy of the banks’ lending decisions, the flow of credit is improved, and then there is no need for an adjudicator!

“Timeliness will be everything. A business refused credit who then appeals will need an immediate decision by the adjudicator and then an immediate release of funds. Weeks or even days in the life of a small business can be the difference between success and failure.

“So what happens if an overturned decision ultimately results in a bad debt? Unless the government is then prepared to underwrite its ‘adjudication’ with its own money – or rather the public’s money – the only likely outcome is failure,” he warns.