How is open banking used in a loan application?

Open banking lets you give a lender, or a firm working for it, read-only access to your business bank account, so it can see transactions and balances without you sending statements. You choose what to share and for how long, and you can withdraw consent through the firm or through your bank.

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What is shared

In a loan application, open banking is used for account information: a regulated firm reads data from your account with your consent. That covers the account details, the balance, and the transactions for a period, with the payee and reference on each. The firm can read; it cannot move money. Starting payments from your account is a separate service that needs its own consent for each payment.

Only firms regulated by the FCA, or by an equivalent European regulator, can join the Open Banking Directory and connect to banks this way. The firm reading your data may be the lender, a broker, or a specialist provider the lender uses. Its name appears on the consent screen. Check it on the FCA register at register.fca.org.uk before you go further.

You never type your online banking password into the firm’s site. The firm sends you to your own bank’s app or website, you sign in there, and your bank asks you to confirm which accounts the firm may see.

Consent, access and withdrawal

Consent

You give explicit consent to a named firm for a stated purpose, then confirm it with your bank. The consent screen says what data the firm will see.

How long access lasts

You choose. For a one-off application the firm reads the data once. Where a firm keeps continuing access, it must get your explicit consent again at least every 90 days.

Withdrawal

Withdraw consent in the firm’s app or website, or tell your bank you no longer want the firm to have access. Reading stops from then.

Figures worked out on paper beside a laptop

How a lender uses the data

The lender, or the firm working for it, sorts the transactions into categories: sales receipts, wages, suppliers, tax, rent, finance repayments and transfers. From that it measures the steadiness of income, the lowest balances, the days over any limit, returned payments, and the repayments already going out to other lenders.

Those figures feed the same affordability test a lender runs on PDF statements. The difference is that the data comes straight from the bank, so there is nothing to check for alteration, and the lender can read every account at once. Some lenders of recurring revenue finance and revenue-based products keep access through the life of the facility and use it to set or review the limit. Ask whether access is one-off or continuing before you consent.

Terms on the consent screen

Account information service
A regulated service that reads account data with your consent. This is what a lender uses.
Payment initiation service
A regulated service that starts a payment from your account, with your consent for each payment.
Open Banking Directory
The list of regulated firms allowed to connect to banks through open banking.
Strong customer authentication
Your bank’s own sign-in and confirmation steps, which you complete on the bank’s app or site.

Before you connect

Read who the firm is and what it will do with the data. Its privacy notice says how long it keeps the transactions it has read and who it shares them with, such as the lenders it presents your application to. Withdrawing consent stops new reading; ask the firm what happens to the data it already holds.

Connect only the accounts the lender needs: the business accounts, and personal accounts only if the lender asks for them, for example from a sole trader. If the lender also asks to connect your accounting software, the same rule applies: know who is reading it and for how long.

Open banking replaces the bank statements on a lender’s list. You still need the accounts, the management accounts and the identity documents. The documents for a business loan lists them.

Questions people ask

Is open banking safe for a loan application?

Only regulated firms can connect to banks through open banking, you sign in on your own bank’s app or site, and the firm cannot move money with account information access. Check the firm on the FCA register, read its privacy notice, and share only the accounts the lender needs.

Can a lender take money from my account through open banking?

Not with account information access, which is read-only. Starting a payment is a separate service, payment initiation, which needs your consent for each payment. A lender collects loan repayments through a Direct Debit you set up separately.

How long does open banking access last?

As long as you agree on the consent screen. For a one-off application the firm reads the data once. A firm that keeps continuing access must get your explicit consent again at least every 90 days, under the FCA’s rules. You can withdraw it at any time.

Do I have to use open banking to apply for a business loan?

No law requires it. Some lenders accept PDF statements from your bank instead, and some build their application around open banking and prefer it. Ask the lender which it accepts.

How do I cancel open banking access?

Go to the app or website of the firm you gave consent to and withdraw it there, or contact your bank and tell it you no longer want that firm to have access. Ask the firm what it will do with the data it has already read.

What documents do I need for a business loan?

For a limited company, a lender asks for recent business bank statements, the last filed accounts, up-to-date management accounts, details of existing finance, and identity and address evidence for each director. For a larger loan or a new business, add a plan and a cash flow forecast. The full answer.

What do lenders look at for a business loan?

A lender reads the company's bank statements and works out whether its cash covers every loan repayment with room to spare. It then checks the trading history, the Companies House record, the credit files of the company and its directors, and what the money is for. The full answer.

Recurring revenue finance

Recurring revenue finance lends a software or subscription business a multiple of its monthly recurring revenue, repaid in monthly instalments from that revenue. The lender looks at how much revenue renews each month and how much is lost, more than at profit. It lets a growing business borrow without selling shares, at the cost of interest and covenants tied to its revenue. The full answer.

Business loans

A business loan is a sum your business borrows and repays with interest over a fixed term, in regular instalments. The lender prices it on the risk it reads in your accounts, your bank statements and any security you offer. Compare offers on the total you will pay in pounds, counting every fee. The full answer.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

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Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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