Government launches an alternative finance matchmaking service for SMEs

Are you a small business owner looking for an expansion loan or searching for a business overdraft? Have your requests been turned down by traditional High Street lenders? Well, Steven Glicher accountants have some good news for you. Under a new government-endorsed matchmaking referral service, entrepreneurs and SMEs who have been refused access to traditional forms of lending, may be able secure alternative finance through 3 new lending platforms – Funding Xchange, Business Finance Compared and Funding Options.

The latest change is a logical continuation of the SME credit data sharing scheme introduced in April. That reform required banks and credit reference agencies to share SME credit information fairly with all providers. The new lending platforms are a logical continuation of that data-sharing scheme.

Under the new scheme platforms will receive details of small business owners who have been refused finance from the UK’s 9 major banks: RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank. Using these details the 3 new lending platforms will then enable small businesses to browse through dozens of alternative finance providers; the major players being Yorkshire Bank, MarketInvoice and Fleximise.

Why has the government decided to take this step? Well, new data suggests that such a step is necessary if the economy is to continue to grow and prosper. The majority of SME applications for finance traditionally start – and usually finish – with High Street banks. Unfortunately the majority of SMEs do not manage to secure the funds needed through these channels. Data shows that 324,000 small businesses attempted to secure loans or overdrafts in 2015: however, 26 per cent of these applications were rejected. What’s more, of the high percentage rejected by High Street lenders, only 3 per cent were then passed on to alternative lending sources.

Speaking about the new matchmaking referral service and its benefits, Chancellor, Philip Hammond, said:

“A refusal from a big bank should not be the end of the line for small business. And, thanks to the finance platforms being launched, now it won’t be.”

Keith Morgan, CEO, the British Business Bank, believes the benefits of the new service are not simply about offering alternative avenues of finance to small businesses: he believes the new scheme will also eventually become an extra layer of service offered by High Street banks in situations where they can’t help their existing clients:

“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,” he said.

What reaction has the new matchmaking service received from business organisations? Well, the reaction has been generally positive. Mike Cherry, National Chairman of the Federation of Small Businesses, welcomed the news, saying:

“The FSB [has] pushed hard for these reforms, and this announcement is good news as the Government delivers on them. This change will boost alternative lenders, bringing more competition and choice in the market beyond the big banks.”

Katrin Herrling, Co-founder and CEO of Funding Xchange, said:

“The launch of the Bank Referral scheme is a significant step in helping the UK’s small business source funding more easily. Even if the bank say ‘no’.”

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