By Claire West
The Federation of Small Businesses (FSB) is supporting The Secured Lending Reform Bill, tabled by George Eustice MP set for its Second Reading in the House of Commons today (Friday 22 October).
The Bill, if passed would close a legal loophole and ensure that small businesses and homeowners alike are treated fairly by their banks. This would not only protect economic recovery but also make it easier for budding entrepreneurs who need access to affordable capital.
Banks are currently exploiting a legal loophole allowing them to aggressively enforce security over a business’s property — including the marital home.
In some extraordinary instances home owners have been deemed trespassers on their own land because banks have exploited loop holes to contractually extend their powers and enter properties which have been put down as security against a small business loan.
John Walker, National Chairman, Federation of Small Businesses, said:
“The most commonly expressed concern from our members over the past few years has been that of their relationship with their bank. Viable small businesses have been refused loans and overdrafts and have increasingly been asked by their banks for more security, including the marital homes.
“In the face of high levels of public sector unemployment, Government needs to do what it can to encourage entrepreneurs to start up their own businesses without having to put at risk the family home. This Bill will not cost the Government a penny but will help small businesses who are being treated unfairly as a result of the banks exploiting loop holes”.
George Eustice MP said:
“If we want to rebalance our economy then first we must rebalance the law in favour of enterprise. The Secured Lending Reform Bill would protect the economic recovery and safeguard the buy-to-let market by preventing sharp practice in the banking industry. It would give small businesses the same rights currently enjoyed by homeowners and it would return the role of receivers to that envisaged in the original 1925 Law of Property Act.
“At the moment banks can and do send in receivers to seize and sell the property of hard working entrepreneurs without even having to obtain a Possession Order from the courts. That must change. Under these proposals, Banks will not be entitled to take possession of a business property unless they have a Possession Order from the Courts first and the Courts will not grant such an order until other counter-claims or disputes between the borrower and lender have been resolved. This improvement to the law is long overdue.”