New scheme requires banks to push loan rejects towards alternative finance
From today, nine of the UK’s high street banks are obliged to pass denied applications to alternative lenders such as Funding Xchange
A new government scheme which requires banks to refer small businesses towards alternative sources of finance if they’re rejected for a loan has kicked off today.
Announced in 2014 by then chancellor George Osborne, the bank referral scheme requires nine of the UK’s major high street banks to give business owners the option of having their applications passed on to three alternative funding comparison sites.
The scheme will aim to plug the estimated £4bn funding gap and break the monopoly held by the Big Four banks – which collectively account for 80% of all loans to small firms.
According to the British Business Bank, around 100,00 small and medium business loan applications are refused every year.
Adam Tavener, chairman of the Alternative Business Funding portal (ABF), said of the launch:
“The bank referral initiative has the long-term potential to transform small business funding in the UK – as it will open up a range of alternative funding providers to small and medium-sized enterprises looking beyond their existing bank for financial support.
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“Post Brexit the importance of small and medium enterprise health to the UK economy has never been greater, so any government initiatives to educate business owners as to the many alternatives to bank funding are to be welcomed.
“As more funding platforms join, more choice and diversity of offering will be available to small businesses in the UK.”