SME finance products must carry an APR

We have joined forces with The Campaign for Regulation of Asset Based Finance (RABF) to issue a challenge to Jeff Longhurst, CEO of The Asset Based Finance Association (ABFA), to make inclusion of APR mandatory in ABFA members' financial promotions.

RABF comments

RABF spokesperson Brian Moore writes: “This single move would help bring much needed clarity to the true price of asset based finance, and help clients compare the cost of finance between propositions and providers…Jeff, if ABFA and its Members want to honour their commitment to being fair, responsible and transparent, and truly have nothing to hide, it would be a huge step forward for the industry to make the disclosure of APR a mandatory requirement.”

Growth Street comments

James Sherwin-Smith, CEO of Growth Street, as a new SME lending platform (and SME itself), is passionate about the cause and the campaign. He says:

“SME finance is the next UK financial scandal in the making. Business lending is currently exempt from APR regulation, which enables some lenders to hide the true cost of this credit by advertising products using prices that either fail to include fees, or use rates for periods shorter than one year. Factoring providers typically quote charges as a low percentage over base rate; however, the fees found in the small print usually constitute the majority of the cost. The lack of price clarity available to SMEs means small firms are paying more than they should for commercial finance. Something needs to be done, and we will be campaigning for APR for SMEs, to form part of the wider government agenda to improve price transparency.”

SME comments

Claire Spencer-Churchill, co-founder and director of Claret Showroom commented: “We were thinking about choosing factoring for our business but when we looked at all the hidden fees we decided to look elsewhere for a better deal.”

Justin Fairhall, MD of Lunchtime said: “It should be of considerable concern to all business’ that APR is not a legal requirement in the commercial world. It’s worrying that if I personally borrow from a bank, they have to tell me the APR, but if I borrow as a business, they’re under no such obligation.”

Get involved

To help SMEs calculate APR on finance products, Growth Street has launched an APR calculation tool. By crowdsourcing what SMEs actually pay for finance, we can create the evidence required to make the case for change.

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