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.
Last year 324,000 small and medium sized business sought a loan or overdraft, 26% of these were initially declined by their bank and only 3% of those declined were referred to other sources of help.
Under a new government scheme, the Alternative Finance Platform Scheme, small businesses struggling to access finance from big banks will be matched with alternative finance options.
are taking part and will pass on the details of small businesses they have rejected for finance to three finance platforms - Funding Xchange, Business Finance Compared and Funding Options.
The platforms will then share these details with alternative finance providers and go on to facilitate a conversation between businesses and any provider who expresses an interest in supplying finance to them.
These new rules make it easier for businesses to access finance when they have been turned down by traditional lenders.
RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank, will all have to offer access to these finance platforms, with small business having to give their permission before their details are shared.
Speaking at the scheme’s launch Chancellor of the Exchequer, Philip Hammond said “A refusal from a big bank should not be the end of the line for a small business and, thanks to the finance platforms being launched today, now it won’t be.”
Keith Morgan, CEO of the British Business Bank said “This new government initiative, supported by the British Business Bank, has the potential to make a real difference to smaller business finance markets in the UK. It gives businesses additional opportunities to secure funding, alternative providers access to a bigger market of potential clients, and major banks an extra service to offer their business clients when they cannot themselves provide finance”.