Banks in the UK may soon be required to refer businesses rejected for credit to alternative providers which may be a better fit.

As part of the Queen’s announcement signalling the opening of parliament, the monarch said, ‘Legislation will be introduced to help make the United Kingdom the most attractive place to start, finance and grow a business.

‘The Bill will support small businesses by cutting bureaucracy and enabling them to access finance.’

The move to begin introductions for referrals of businesses not successful in a banking loan application comes after the rise of crowdfunding and peer-top-peer finance platforms. Lending and investment platforms such as Funding Circle, MarketInvoice and Seedrs allow consumers to invest or lend directly to small and medium-sized businesses.

Already, through a joint partnership called the Alternative Business Finance Portal, eight lenders are referring to each other.

The Queen also announced that new legislation will require ministers to set and report on a deregulation target for each parliament.

She added, ‘The legislation will also reduce delays in employment tribunals, improve the fairness of contracts for low paid workers and establish a public register of company beneficial ownership.

‘[It] will impose higher penalties on employers who fail to pay their staff the minimum wage.’

Commenting on the development to GrowthBusiness, Rich Wagner, CEO and founder of Advanced Payment Solutions (APS), says, ‘This new regulation puts the customer back in the spotlight, and will shake the financial services giants to their core.

‘It is hardly surprising that this move was met with “intense opposition” from the banks prior to today’s speech – it will hit them in the pocket by preventing them from jealously guarding ownership of the customer relationship.’

Wagner also believes that once banks fail to give SMEs credit, or basic banking services, they will not be able to ‘put them on ice’ for the future when the business is in a position to produce a profitable relationship.

More on alternative finance:

• Alternative lending market forecast to hit £1.6 billion by 2014
• Banks’ hesitancy leads to more considering alternative funding
• Five businesses using invoice finance to fuel growth

Rhydian Lewis, founder and CEO of alternative lender RateSetter, believes that there is a ‘damaging disconnect’ between credit-hungry SMEs and traditional sources of finance, one which is impacting the UK economy.

In laying out the agenda for the government in the coming year, the Queen also announced that new legislation will introduce higher penalties for employers failing to pay staff minimum wage alongside separate rules tackling avoidance of national insurance.

Citing evidence that stock lending to SMEs fell in 2013 for the fourth consecutive year, Tungsten Corporation CEO Edmund Truell says that he welcomes the Small Business Bill.

‘The “old guard” of lenders – pre-occupied with repairing balance sheets – is not serving SMEs as they should.

‘Conservatism on the part of established lenders has starved SMEs of working capital, curbing economic growth. However, it has markedly stoked demand for alternative sources of finance.’

The Small Business Bill will be published on 16 June 2014, after which a process through a second reading, committee and report stages will occur. It will then be subject to a third reading and is expected to pass through both houses by March 2015 – ahead of the general election in May.