Small businesses struggling to access finance from big banks will be matched with alternative finance options under the government’s new scheme
While a disruptive idea will get you on the launch pad, startups can only begin to reach for the stratosphere once they’ve secured funding. But raising capital can sometimes be easier said than done, which is why the government has launched the Bank Referral Scheme to help entrepreneurs get the financial help they need.
According to the Treasury, 324,000 SMEs sought a loan or overdraft last year. However, 26% of applicants were initially declined by their bank and only 3% of those who were rejected were referred to other sources of help. To address the problem and offer SMEs alternative finance routes, the government is partnering with RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank.
Under the new scheme, if these banks decline to help an SME with funding, they’ll pass on the business’ information to three alternative finance platforms: Funding Xchange, Business Finance Compared and Funding Options. These platforms will then share the company’s details with alternative finance providers and help set up conversations between the business and any provider who expresses an interest in supplying finance. “This change will boost alternative lenders, bringing more competition and choice in the market beyond the big banks,” said Mike Cherry, national chairman of Federation of Small Businesses.
Commenting on the initiative, 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. A refusal from a big bank should not be the end of the line for a small business and, thanks to the finance platforms being launched today, now it won’t be.”
Given that British entrepreneurs are proving their salt time and time again, we can only welcome this initiative to help startups take off.