Why isn’t the Bank Referral Scheme helping more small businesses?

A scheme to help small businesses turned down by banks borrow from peer-to-peer and alternative finance firms has proved ‘underwhelming’ and needs an overhaul, say experts.

The Government-backed Bank Referral Scheme was launched in November 2016 and requires the UK’s biggest banks to refer small and medium-sized businesses they turn down for finance to a platform,  to help facilitate alternative funding.

But just 1,695 deals were completed between launch and summer last year, compared to 30,000 businesses turned down for funding by banks, latest figures from a  HM Treasury review show.

Mike Cherry, of the Federation of Small Businesses, said: ‘Helping well under one per cent of the small business community secure a few million over three years doesn’t scream roaring success.’ For more visit:

© Provided by This Is Money Almost 1,700 businesses secured alternative funding thanks to the Bank Referral Scheme between 2016 and 2019 – but this is minute compared to the 30,000 SMEs rejected by banks

Tens of thousands of entrepreneurs could be missing out on growing – or even starting – a business because they are left feeling disheartened after being turned down for funding from banks – and do not recognise the opportunity to be had from the Bank Referral Scheme.

It was introduced in response to data that showed SMEs that were rejected funding by their bank tended to give up rather than seek alternative options to grow their business. But recent reports show this still seems to be an issue.

In a 2018 report, the Federation of Small Businesses (FSB) said progress was being made thanks to the scheme but few referred businesses were actually going on to be successful in their applications.

Meanwhile, according to alternative finance provider Nucleus Commericial Finance, nearly four in ten (39 per cent) of UK SMEs have encountered financial challenges over the past 12 months.

Within that group, a quarter of business owners dipped into their personal savings to address those issues, while 27 per cent simply took no action, rather than seeking the funds they needed from elsewhere.

Nucleus chief executive Chirag Shah said: ‘As we enter a new year, we need to encourage business owners to be more vigilant of their finances and be more aggressive when it comes to growing revenue.

‘Entrepreneurs should rest assured that there are options available and as an industry, we should be educating them on the benefits of seeking external finance.

‘Together we can help SMEs be better equipped to tackle any financial challenges; boosting performance and ultimately improving the country’s GDP.’