UK’s SME finance referal system underway
(11 November 2016 – United Kingdom) The UK government’s banking referral scheme has launched earlier this month. Announced as part of its attempt to shake up the SME lending landscape, the scheme comes into effect at a time when smaller businesses are in greater need of growth capital than ever before.
The scheme mandates that major high street banks must refer SMEs on to a number of alternative finance providers in cases where the bank declines to offer lending. The scheme aims to help the 25 percent of small business loan applicants who are initially declined by the banks, many of which often cancel their growth plans rather than explore alternative options that may be more suitable.
The British Business Bank estimates that 100,000 businesses have their applications for debt rejected each year, representing a possible funding gap in the UK of £4 billion (A$6.7 billion).
The treasury has announced its preferred platforms to administer the scheme and has chosen Funding Xchange, Funding Options, and Business Finance Compared. According to Katrin Herrling, co-founder and CEO of Funding Xchange: “The launch of the bank referral scheme is a significant step in helping the UK’s small businesses source funding more easily. Even if the bank says ‘no’, Funding Xchange will be there to help tens of thousands of small businesses access the best funding solutions that are right for them.
“When we founded Funding Xchange, we started with the need to create transparency of available funding solutions – including terms and pricing – so that business owners can feel in control of the process and confident to move forward. This is already common in the personal finance market but has been lacking in SME funding.”
Rob Straathof, CEO of finance provider Liberis, welcomed the scheme’s launch. “Small businesses are the backbone of the UK economy, so it’s great to see the government promoting access to alternative finance sources where it’s most needed. Many SMEs can fall at the first hurdle; with long-winded, costly applications, or they are put off from applying by the banks. Boosting access to convenient and transparent alternatives could kick-start growth for thousands of businesses.”
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