A government initiative to force banks to refer SMEs to alternative lenders will soon come into force. Led by the Treasury, the referral scheme is designed to channel firms that fail to secure bank finance onto other providers of finance – from asset-based lenders to crowdfunding platforms.
Once the scheme comes into effect, nine leading banks will be legally obliged to refer applicants on to a list of approved lenders. The move comes in the wake of the CMA’s report into the retail banking market that found a lack of transparency and effort on the part of banks to help businesses source altenrnative forms of finance.
Figures vary on the number of unsuccessful applications for finance. Banking groups admit about 150,000 small and medium businesses are rejected for bank funding every year, while some business groups put the figure nearer 250,000.
‘An array of different options’
Rob Straathof, CEO of Liberis, said the move will herald a new era for borrowers – and finance providers. “Small businesses are vital to creating jobs and growing the economy, yet many still struggle to get loans through traditional providers like banks.
“We hope this move will help bridge the gap between traditional and alternative methods of finance, helping small businesses understand the array of different options available to them to grow.
“The alternative funding sector is growing rapidly, and we will continue supporting small businesses currently underserved by banks.”