Autumn 2016 brought some good news for the many small companies who find it difficult to secure business finance from the high street providers. A new government bank referral scheme ensures that the large lenders will signpost borrowers to a range of alternative funding options.
In 2015, 26% of the 324,000 small and medium-sized businesses approached their bank for a loan or overdraft were initially turned down. Historically, most businesses seeking finance would only ask one lender – usually their bank. And rather than looking for alternative ways to raise the funding, they would often simply give up on the process.
But having been turned down for a bank loan does not have to put an end to your business plans…
Three business finance platforms
In November 2016, the government launched a new bank referral scheme that will provide small businesses with details of alternative finance providers.
Nine of the UK’s biggest banks are involved in the initiative. As part of the scheme, the banks will pass on the details of each small business that is rejected for finance to three finance platforms. These are: Funding Xchange, Business Finance Compared and Funding Options. The information will only be shared, however, if the business gives the bank permission to do so.
Linking businesses to providers
The three finance platforms will, in turn, share the details of the businesses seeking finance with alternative finance providers. Their role is to then ‘facilitate a conversation’ between the small business and finance providers who are interested in lending to them.
The Federation of Small Businesses has long pushed for such a facility to be in place. We hope it will be successful in bringing more competition and choice in the finance market for small businesses.
A wealth of finance and funding options
If you need funding to improve cash flow or get a project off the ground, your RfM advisor can help. As a first step, an RfM advisor will take time to get to know you, your business position and your aims so that they can make recommendations for the right types of finance and funding. This might be one type of funding, or a package of several options depending on what you need to achieve. We can then help you approach providers and prepare financial projections if needed to secure the finance.
And thanks to our experience, knowledge and connections, we can often find funding with better terms than you might be able to get independently.
RfM also features in the Finance & Funding Directory 2017 which details the many options for raising finance available on the market.