Finance 23 June 2017
The bank referral scheme: Is it fixing a non-existent problem?
Reflecting on the current finance landscape for small business owners, Anthony Persse, director of strategy at Ultimate Finance, considers whether the bank referral scheme is a solution to a problem that doesnt exist The bank referral scheme, launched in November 2016 to help small business ownersaccess finance if bank lenders are unable to offer what they need, was heralded as an innovative idea, which would significantly impact the small business community. But has it worked for those it was intended to support? The scheme committed nine of the UK’s largest lenders to passing on details on small firms rejected for finance to three alternative funding platforms Funding Xchange, Business Finance Compared and Funding Options. These platforms then share details with other alternative finance providers to facilitate a conversation between the entrepreneur and a potential finance partner Yet just over six month later the Treasury is announcing a review of the financial match-making? service, after much lower volumes of referrals than expected have been recorded by lending companies. The aim of the review is to find out where the blockages are and make sure that the banks are offering the support that smaller businesses need. The problem is, the review won’t ask the right questions to really get to the bottom of the problem because it will start with the same assumptions that those who ideated the Scheme in the first place began with that banks are not lending to SMEs. But is that really the challenge? We recently undertook research about this issue and spoke to hundreds of small businesses about accessing the cash they need. And, we got a very different answer back. Over half of them were confident of getting a bank loan, if needed. The real issue was a demand one they didnt want to borrow money. They had a misconception that borrowing money showed signs of a weak business, or that they would lose their autonomy if they took funding.