06 Sep 2017 9:45 AM

Small businesses struggling to access finance from major banks have received almost £4 million of funding thanks to an innovative scheme.

Over the past nine months, 230 small businesses from beauticians to forklift truck training companies, which were rejected for loans by some of the UK’s best-known banks, have received £3.8 million from alternative lenders.

The government-backed referral scheme, launched at the end of 2016, requires nine of the UK’s largest 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. The nine banks are: RBS; Lloyds; HSBC; Barclays; Santander; Clydesdale and Yorkshire Bank; Bank of Ireland; Danske Bank and First Trust.

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 supplying finance to them.

“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,” said Stephen Barclay, Economic Secretary to the Treasury.” A refusal from a big bank should not be the end of the line for a small business and, thanks to our match-making scheme they have another avenue to try for funding,” he added.

Spreading your options

Loans resulting from this scheme ranged from £200 to £500,000 in size, with the average amount standing around £16,000. Business sectors which have benefited from the initiative include construction, retail, technology and science. A fourth finance platform, Alternative Business Funding, will join the scheme from 1 November 2017 to extend the options available to businesses.

According to HM Treasury, research shows that 71% of businesses seeking finance only ask one lender and, if rejected, may simply give up on looking for the required cash injection rather than seek alternative options.

“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 for UK economic growth,” pointed out Keith Morgan, chief executive officer of the British Business Bank.

If you have financing concerns, please get in touch.