New finance service
In 2015, of the 324,000 small and medium sized businesses seeking a loan or an overdraft, 26% were initially declined by their bank. Historically the majority of businesses seeking finance only ask one lender. If they are rejected for finance many give up on investment rather than seeking alternative options.
In November 2016, the government launched a scheme for small businesses which have difficulty in obtaining finance from the larger banks in the UK. The scheme provides the business with details of alternative finance providers.
Under the scheme, the government requires nine of the UK’s biggest banks to pass on the details of small businesses which have been rejected for finance to three finance platforms - Funding Xchange, Business Finance Compared and Funding Options. However, businesses must give permission for their details to be shared.
The finance platforms will share the information on the consenting business with alternative finance providers in order to ‘facilitate a conversation’ between the small business and any finance provider who expresses an interest in them.
The Federation of Small Businesses helped to push for this facility and we agree with the hope of the Federation that it will bring more competition and choice in the finance market.