Small businesses struggling to gain finance from big banks will be matched with alternative lenders, under a new government scheme.
The banks will pass on the details of small businesses they have rejected for finance to three platforms – Funding Xchange, Business Finance Compared and Funding Options.
These platforms will then share these details with alternative finance providers and go on to facilitate a conversation between the business and the lender.
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.
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.
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, now it won’t be.”
Mike Cherry, National Chairman, Federation of Small Businesses, said: “This change will boost alternative lenders, bringing more competition and choice in the market beyond the big banks.”