When the Government’s bank referral scheme was announced back in November, many small business owners hoped that their funding problems would become a thing of the past. Fast forward nine months and it’s been announced that the initiative has helped 230 British businesses access £3.8 million funding.
Has the bank referral scheme been a success?
With an approval rate of just 2.8 per cent of the 8,100 businesses referred through the programme, there has been widespread criticism that the scheme is not doing enough to help small business owners access the funding they need. Official statistics show that of the 25 per cent of businesses which were initially declined by a bank (from a pool of 220,000 last year) only seven per cent were referred to other sources of help.
Figures reveal that the existing platforms have lent sums of between £200 and £500,000 with the average being £16,000.
Former business secretary and Lib Dem Vince Cable has blasted the slow progress of the so-called matchmaking scheme which he described as happening on ‘a minute scale’.
However, speaking about what the Government are calling the ‘innovative scheme’, Economic Secretary to the Treasury, Stephen Barclay 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 our match-making scheme they have another avenue to try for funding.
Over 200 businesses from beauticians to forklift truck training firms have received the money that they need to grow and we expect this number to increase as the scheme matures.”
A report commissioned by the Treasury into the scheme by Russel Griggs suggested improvements including a move towards making the system embedded within bank processes.
Head of Businesscomparison.com Philip Brennan comments:
“The Government really need to get behind small and medium sized business owners and providing an effective, user friendly solution to the funding crisis is a step towards this. However, as the statistics show, the bank referral scheme is still failing to help many business owners get the finance they so desperately need to grow their firm or even to stay afloat.
“Guidance needs to be provided to entrepreneurs on how to put together a solid plan for their applications to be accepted. If the funding is failing to reach the businesses that need it then it is not successful. Improvements need to be made swiftly and in-line with recommendations.”