01 November 2016
SMEs offered route to alternative finance
A new government initiative aimed at bridging the £4bn gap in lending will offer more diverse finance options for companies that have been rejected by traditional lenders.
The referral initiative - that comes into effect today - makes it obligatory for the UK's largest banks to pass on details of firms struggling to access loans to finance platforms. These details will be shared with alternative finance providers, such as online financiers and peer-to-peer lenders.
Companies will be required to give their permission before their details are shared.
Each year 100,000 SMEs have loan applications rejected, totalling £4 billion, according to a recent survey by the British Business Bank.
Chancellor of the Exchequer, Philip Hammond believes small and medium-sized businesses are the "backbone of Britain's economy", saying it is right they have access to a wide range of sources of finance.
He added: "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 today, now it won't be.
"We are determined to maintain the prosperity of our business sector and to support an environment where small businesses can grow and thrive."
Mike Cherry, national chairman, Federation of Small Businesses, said: "Small firms struggling to access finance will now automatically have a new way to get the support they need to invest and grow.
"FSB pushed hard for these reforms, and today's 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."