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230 SMEs receive £3.8m from bank referral scheme

Tom Belger | 16:15 Friday 11th August 2017

Over the past nine months, 230 small businesses – which were rejected for loans by the UK's major banks – have secured £38m through the bank referral scheme.

The government-backed scheme requires nine of the UK's biggest banks to pass on the details of small businesses they have turned down to three business platforms, which will rise to four in November.

Over 8,100 businesses have been referred under the scheme.

The scheme currently uses platforms Funding Xchange, Business Finance Compared and Funding Options with Alternative Business Funding becoming the fourth platform on 1st November.

The platforms share the details of SME applicants provided by the major UK banks with alternative finance providers, including challenger and specialist banks.

Metro Bank and CYBG are lender partners of Funding Xchange and Business Finance Compared respectively.

“A refusal from a big bank should not be the end of the line for a small business and, thanks to our matchmaking scheme, they have another avenue to try for funding,” said Stephen Barclay, economic secretary to the Treasury.

“Over 200 businesses from beauticians to forklift truck training firms have received the money that they need to grow and we expect this number to increase as the scheme matures.”

Mike Cherry, national chairman at the Federation of Small Businesses, said it had championed the use of a mandatory bank referral scheme to help diversify the lending market.

“We welcome that government has delivered the three platforms and congratulate the scores of firms that have benefited in the scheme's early stages.

“To provide further economic benefit across the UK the scheme must now scale-up, with more referrals and more businesses successfully securing finance as a result.”

Research has found that 71% of businesses seeking finance only ask one lender and, if rejected, many simply give up.

"As highlighted by our recent 2017 Small Business Finance Markets report, the most common response from smaller businesses when they do not get the full amount of finance applied for is to give up or cancel their plans,” said Keith Morgan, CEO of the British Business Bank.

“This can mean businesses missing potential expansion opportunities, with a knock-on effect on UK economic growth.

“It is, therefore, heartening to see the positive start made by the bank referral scheme."

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