Small businesses struggling to gain access to finance from big banks have received almost £4 million of funding.
The government-backed bank referral scheme, launched in November 2016, requires 9 of the UK’s biggest banks to pass on the details of small businesses they have turned down for loans to three finance platforms – Funding Xchange, Business Finance Compared and Funding Options. These platforms then share their details with alternative finance providers and go on to facilitate a conversation between the business and any provider who expresses an interest in providing access to finance to them.
Over the past 9 months, 230 small businesses from beauticians to forklift truck training companies, which were rejected for loans by some of the UK’s biggest banks, have gained £3.8 million from alternative lenders.
Loans resulting from this scheme ranged from £200 to £500,000, with an average size of £16,000. A number of sectors have benefited including construction, retail, technology and science.
A fourth finance platform, Alternative Business Funding, will join the scheme from 1 November 2017 to widen further the options available to businesses. The government will continue to work with banks to embed and improve their referral processes.
Keith Morgan, CEO of the British Business Bank, said:
“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. 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.”
Research shows that 71% of businesses seeking finance only ask one lender and, if rejected for finance, many simply give up on investment rather than seek alternative options. In 2016 220,000 small and medium sized business sought a loan or overdraft, 25% of these were initially declined by their bank and only 7% of those declined were referred to other sources of help.
Stockport based businesses can also apply to the Stockport Business Finance Scheme