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The Bank Referral Scheme


In 2014, the government announced that it’d be consulting on whether it would ask banks who turned down small businesses (SME’s) for finance to refer those businesses to alternative lending providers.

In 2015, the legislation was passed, that saw this become a requirement for banks and on 1st November this year, the Bank Referral Scheme came into existence.

SME’s & Finance

Many SME’s face the issue of not being able to have access to finance when it’s needed. Figures suggest that around 100,000 or so are turned down for a loan by the leading banks every year. A lot of businesses aren’t aware that there are alternative sources of finances or how to go about finding them. It can be tricky to do a like for like comparison of what is available and to find lenders who will lend to you.

There are a fair few non-bank lending schemes around – from loans against business assets to peer-to-peer lending programs and equipment leasing, which all have different repayment arrangements.

How does it work?

As of 1st November 2016, if a bank turns down a small business for a loan, by law, they must give the business the opportunity to be referred to one of the new alternative lending platforms. Nine of the major banks including Lloyds, Santander and Natwest are impacted by the legislation.

Crucially, the SME retains control and will only be referred once they’ve given their express permission. Once this happens, a portfolio of key information is passed onto the platforms, allowing them to assist the business with gaining the required finance.

There are three designated platforms: Funding Options, Funding Xchange and Business Finance Compared, that work with a number of alternative finance providers and act as an intermediary between the SME and the provider. Further platforms are due to be designated in 2017 and beyond.

The scheme is open to all British SME’s (based here) looking for finance greater that £1,000 and with a turnover of up to £25,000,000. It is hoped that it will be the first step in addressing the SME funding issues and so far looks to be beneficial to all parties involved.

Funding Options

We’re partnering with Funding Options, the industry leader in matching businesses with the best finance provider for their personal circumstances. You can find out more information about its service here.