The Competition and Markets Authority has introduced new rules making it easier for UK small businesses to get loans and change banks.
At the moment, only 4% of business customers switch to a different bank in any year and each bank asks for different information from businesses applying to open current accounts. This has encouraged many small businesses to use their existing Personal Current Account provider for their business account and has discouraged them from switching.
The Competition and Markets Authority (CMA) is now insisting that Business Current Account opening procedures are standardised, so all banks will now ask for the same information from applicants. In addition, banks must also provide customers who are closing their account with five years of transaction history, free of charge, unless they choose to opt out - removing another barrier to switching.
"Simplifying the process of changing business current accounts will remove one of the biggest barriers to switching and securing a better deal," said Mike Cherry, national chairman of the Federation of Small Businesses (FSB). "Small business owners want to focus on running their firms. They don't want to spend any more time than is absolutely necessary on paperwork."
The CMA has also announced the launch of a loan price and eligibility tool by four banks: RBS Group, Lloyds Banking Group, HSBC Group and Barclays. This tool will help SMEs to understand the costs of taking out a loan and find the best deal for them.
Cherry said: "Only one in ten small businesses currently applies for external finance - that has to change. The loan eligibility tools for small businesses launched today will make finding the right finance product that much easier. Equally, allowing improved access to transaction histories promises to streamline the process of vetting a firm's creditworthiness."
In light of the rules changes, UK Finance has launched an online guide to help small businesses applying for a business bank account. The guide provides the essential details and documents that most businesses will need to open an account.
Any small businesses wanting to open or to switch a UK business current account can search for Business Account Checklist on their chosen bank's website or visit the UK Finance site.
Stephen Pegge, managing director of commercial finance at UK Finance, said: "Opening a business current account is an important step for any business and we want to help ensure that the process is as simple as possible. The new guide we've developed with the banks aims to make the process easier for businesses ... we believe that this will in turn help to promote greater choice and competition in the business current account market."