Small businesses struggling to access finance from traditional lenders can turn to alternative funding platforms following under a government initiative.
9 of the biggest banks have agreed to refer the details of SMEs they have rejected for finance to 4 funding platforms.
Alternative Business Funding, Funding Xchange, Business Finance Compared and Funding Options will then share those details with potential investors.
Treasury figures claim more than 324,000 SMEs sought a loan or overdraft in 2016, with 26% being rejected and only 3% of those being referred to alternative funding sources.
71% of firms only asked the 1 lender, with most of those ending their search for external finance after being rebuffed.
Chancellor Philip Hammond said:
“Small and medium-sized businesses are the backbone of Britain’s economy and it is right they have access to a wide range of sources of finance.
“A refusal from a big bank should not be the end of the line and we are determined to support an environment where small businesses can grow and thrive.”
Mike Cherry, chairman of the Federation of Small Businesses, added:
“Small firms struggling to access finance will now automatically have a new way to get the support they need to invest and grow.
“This change will boost alternative lenders, bringing more competition and choice in the market beyond the big banks.”