Is the Bank Referral Scheme a good idea that’s come too late?

In November last year the government launched the Bank Referral Scheme. It was designed, with all good intentions, to make big lenders pass on small companies that they’ve turned down for loans to other finance providers via one of three online portals.

At first glance, this seems like a good idea. We know from some of our customers that the big banks are not always able to meet their funding needs.

But it became apparent to us quite quickly that the Scheme wasn’t going to work all that well, and The Treasury appears to agree. A recent report in the Times suggests that the Treasury are investigating if the nine banks covered by the scheme are abiding by the rules and passing on customers as they are supposed to do. A Treasury source is referenced, commenting that the number of companies passing through the scheme so far had been “limited”.

But we have always felt there was a second, bigger issue. The Bank Referral Scheme feels as if has been designed for a financial sector that’s already moved on.

The nature of ‘traditional’ lenders and their modern, so-called ‘alternative’ counterparts has changed rapidly in recent years. Ultimate Finance, for example, is a credible funding partner for SMEs, with years of experience under our belt and the financial backing of the Tavistock Group.

Therefore, is a Bank Referral Scheme needed when genuine funding options exist for small businesses? Is what we actually need, more education so SMEs are informed of where they can turn when the banks can’t help or they simply want a second quote?

A lot of resource has been pumped into making the Bank Referral Scheme work, and we are delighted that it is being questioned and not just treated as a sticking plaster to cover the gaps in access to cash for SMEs.

Because that is the real issue here. SMEs need working capital to grow and not being able to access cash can have a hugely negative impact on a small business’ ability to operate. That is not to say that banks are the big, bad boy that won’t help the little guy; banks are stifled by slow, out-dated systems that make it very difficult for them to help even if they want to.

What we believe is that cash that is fast, flexible and fair should be accessible for all businesses and that is just what we offer.

So, while the Bank Referral Scheme is, in theory, a good thing the reality is it is not really needed so it’s hardly a surprise it’s not working that well.



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