A cross-party group of MPs is backing a campaign that would force finance providers to introduce a comparable cost of lending to help small businesses to get a better deal.
Helen Goodman, the Labour MP and Treasury select committee member, is among those supporting a call from business groups for legislation that would require all lenders to provide an annual percentage rate (APR) for their small business finance products.
The campaign is supported by the Institute of Chartered Accountants in England and Wales, the Forum of Private Business and the Institute of Directors. Companies are “often misled” by lenders over the true cost of facilities because of the absence of commercial lending, the groups claim.
Growth Street, a business overdrafts provider that is leading the initiative, said that lenders were “employing opaque tariff charges, hiding fees in complex terms and conditions and making it difficult for firms to compare the cost of finance”.
The Conservative MP Julian Lewis and two more members of the committee, Wes Streeting, of Labour, and George Kerevan, of the Scottish National Party, are also supporting the campaign.
A mandatory APR for small business finance would be controversial because some lenders argue that it is a blunt and potentially misleading measure, making short-term products that may be appropriate in some circumstances seem disproportionately expensive. There also would be concerns among lenders and regulators that such a measure would represent a first step towards regulating commercial finance.
Ms Goodman said: “The government has introduced stronger controls for [short-term lending to] individuals because they were being exploited. That was right. When I talk to small businesses they are often in a similar situation to an individual when dealing with a bank or finance firm.”
The Competition and Markets Authority will publish its ideas to boost competition in retail banking and small business finance today.
Commercial lending to limited companies in the UK is not regulated by the Financial Conduct Authority.