A new government scheme helping small businesses to access funding has just been announced. Under the scheme small businesses struggling to access finance from big banks will be matched with alternative finance options.

Nine of the UK’s biggest banks have agreed to pass on the details of any small businesses they have rejected for finance to three finance platforms – Funding Xchange, Business Finance Compared and Funding Options.

These finance platforms will then share the company’s details with alternative finance providers and facilitate conversations between the business and any provider that expresses an interest in funding them.

Business leaders have welcomed the scheme as the new rules will make it easier for small and medium-sized businesses to access finance when they have been turned down by traditional lenders.

The banks involved – RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank – will now have to offer access to these finance platforms if the small business involved has given its permission to share its details.

The scheme will boost alternative lenders and offer small businesses more choice in the market beyond the big banks. The growth of some small businesses has previously been restricted by a lack of finance options so the new initiative should open the way to companies finding alternative sources of funding from emerging banks and lenders.

Research shows that 71 per cent of businesses seeking finance only ask one lender and if rejected many give up on investment rather than seek alternative options. Last year 324,000 small and medium-sized business sought a loan or overdraft. 26 per cent of these were declined by their bank and only 3 per cent of those declined were referred to other sources of help.

According to the government website the Chancellor of the Exchequer 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 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.”

If your business needs to access finance for growth the Black Country Growth Hub offers advice and support to local companies, including information about available grants, loans and equity funding streams.