Matchmaking alternative finance service launched for SMEs
4th November 2016 | News
Entrepreneurs and owners of small businesses unable to access traditional forms of finance can take advantage of the Government’s new matchmaking referral service to secure alternative finance through three new platforms.
Funding Xchange, Business Finance Compared and Funding Options are the new platforms which will receive details of small business owners refused finance by nine traditional banks – RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank.
These new platforms will enable entrepreneurs to browse dozens of alternative finance providers, notably Yorkshire Bank, MarketInvoice and Fleximize.
New Government data suggests the majority of SME applications for finance start and finish with high street banks. A total of 324,000 small firms attempted to secure a loan or overdraft in 2015, with more than a quarter (26%) rejected and only 3% funnelled through to alternative finance sources.
Chancellor of the Exchequer, 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,” Hammond said when outlining the benefits of the new ‘matchmaking’ service.
However, Keith Morgan, CEO, the British Business Bank, believes it’s not just about increasing access to alternative finance; he believes the new scheme can become an extra layer of service offered by high street banks when 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,” said Morgan.
In reaction to the news, Mike Cherry, National Chairman of the FSB, said: “The FSB 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.”
The latest change is a logical continuation of the SME credit data sharing scheme introduced in April. This reform requires banks and credit reference agencies to share SME credit information fairly with all providers.
The finance platform scheme would appear to be a logical step forward from the SME credit data sharing scheme.
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’.”