Posted on 3 November 2016
The government has launched a new service aimed at matching small companies that have struggled to obtain funding with alternative lenders.
This means that some of the UK's biggest banks will now have to pass on the details of small businesses they have rejected for funding to three alternative finance platforms: Funding Xchange, Business Finance Compared and Funding Options.
Companies will have to give the banks their consent to pass on their details to the platforms, which will then, in turn, share them with alternative finance providers. It is expected that this will promote conversations between the business and any provider that expresses an interest in funding them.
It is hoped that small firms struggling to access finance will now automatically have a new way to get the support they need to invest and grow. The Federation for Small Business has pushed hard for these reforms, and the anticipation is that the change will boost alternative lenders, bring more competition and provide a greater choice in the market beyond the big banks.
The launch of the platform has been awaited for over a year and it is expected that it will help businesses, who need loans and overdrafts, to look beyond the banks when they are unsupportive.
Last year it is estimated that over 300,000 small and medium sized businesses sought a loan or overdraft. Of these 26 per cent were initially declined by their bank and only 3 per cent of those were referred to other sources of help.
We understand how critical cash flow is to the success of businesses, and how their growth has been potentially restricted by some banks' retrenchment. This initiative should now provide businesses with more scope for finding alternative sources of funding from the emerging banks and alternative lenders.
If you have been rejected for funding speak to us as we often know how to make it happen. Get in touch with your usual Smith Cooper contact or by clicking here.