Recently the British Business Bank issued a call for partners to be part of their initiative. This is something the NACFB has been closely involved with for the past two years. As you may already be aware, ten major banks will be obliged to offer any business whose loan application they have rejected a referral to a choice of new online platforms in an effort to boost access to finance. The NACFB’s www.findsmefinance.co.uk is one of the platforms shortlisted.
But it has been claimed that in some cases banks are pushing for the referral to take place only after a business has failed a long internal application process. Alternative funders say that referring businesses only after "a long and painstaking review" will exclude hundreds of thousands of businesses from the funding they need, particularly firms needing finance quickly such as for equipment repairs and new contracts.
First-time SME borrowers are facing a 50% rejection rate, with fewer than 2% declined for loans by banks appealing the decision (and only 1.3% successful in their appeal). It could be that the number of appeals is some guide to how many of these rejected borrowers will pursue their own referral opportunity.
Two NACFB patrons have weighed in with their comments. Norman Carson, director of business development at Boost Capital, said: "Much of our industry feels frustrated at the time the bank referral scheme is taking to materialise. The key issue is the way in which this system may be administered by banks themselves.
"If SMEs do not get referred until after a long decision process, I fear it will destroy the referral programme before it gets started. This positive attempt to link capital-hungry enterprises with lenders that want to do business with them will be certain to fail."
Meanwhile Adam Tavener, chairman of Clifton Asset Management, went on record to say: "Relationship managers know which applicants are likely to succeed or not, so they could say during an early conversation that, with the business owner's permission, they could pass on the company’s details to an alternative platform.
"By setting the tone at the beginning of the transaction you catch as many as 300,000 businesses, rather than the last men standing who've had the patience to endure a long and painstaking review."
The British Business Bank is working to educate smaller businesses on the variety of finance options available to them, and has sent its Business Finance Guide, published in conjunction with the ICAEW last year, to over 700,000 smaller businesses since its release.
The NACFB agrees fully with the British Business Bank that the referrals process will allow many more smaller businesses to successfully seek the finance they need to survive and grow – but we have to work together to minimise the scale of the hurdles SMEs face at every stage.
