Small businesses in the UK have been handed a boost with the launch of the government’s bank referral scheme. First proposed in August 2014, and endorsed by Fleximize, the scheme obliges nine of the UK’s biggest banks to pass on the details of small businesses that they have rejected for finance to three finance platforms – Funding Options, Funding Xchange and Business Finance Compared. The platforms will then share these details with alternative finance providers, before facilitating a conversation between a business and any lender that is interested in funding them.
The scheme should give small businesses a greater chance of securing the finance that they need to grow. Of the 324,000 small and medium-sized businesses that applied for a loan or overdraft last year, 26% were initially turned down by their bank, with only 3% of those declined referred to other finance providers. Further research reveals that 71% of businesses only ask one lender when they are seeking finance, and give up if they are rejected, rather than seeking alternative finance options.
However, many of the UK’s alternative finance providers look at creditworthiness in a different way to the banks, and will often fund companies that are regarded as too risky by traditional lenders. It is hoped that the bank referral scheme will raise awareness of the numerous funding options that are now available to Britain’s small businesses, and set them on the path to growth.
Philip Hammond, chancellor of the exchequer, said: “Small and medium-sized businesses are the backbone of Britain’s economy and it is right they have access to a wide range of sources of finance. We are determined to maintain the prosperity of our business sector and to support an environment where small businesses can grow and thrive.”
Small and-medium-sized businesses are the backbone of Britain’s economy and it is right they have access to a wide range of sources of finance.
Keith Morgan, CEO of the British Business Bank, added: “This new government initiative, supported by the British Business Bank, has the potential to make a real difference to smaller business finance markets in the UK. It gives businesses additional opportunities to secure funding, alternative providers access to a bigger market of potential clients, and major banks an extra service to offer their business clients when they cannot themselves provide finance.”
Here’s hoping the bank referral scheme proves just the job for Britain’s burgeoning small businesses.
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