What is the Bank Referral Scheme and why does it matter?

Many small business owners don’t know about the Bank Referral Scheme, but it represents a significant milestone for business funding in the UK.

But what exactly is The Bank Referral Scheme, how does it work, and how will it help businesses? We asked Conrad Ford, Chief Executive of Funding Options, to explain;

What is the Bank Referral Scheme?

The Bank Referral Scheme is a government-mandated scheme that requires major banks to refer their rejected business loan applicants to designated finance platforms.

In practice, this means potentially viable businesses, that are refused a bank loan, can work with alternative finance providers to find a business loan they’re eligible for.

The scheme was passed into law as part of the Small Business, Enterprise & Employment Act 2015, and officially launched on 1st November 2016, so it’s now a legal requirement for banks to offer a referral to businesses that are declined a business loan.

Why is it needed?

Bank lending to small and medium sized businesses has been at low levels for years. Since the credit crunch, the banks’ criteria for business loans have become much harder for smaller firms to satisfy, and research shows that most businesses look to their bank when they need funding, and they’ll give up if they don’t get it.

Access to capital is a vital ingredient for future growth, so a lack of funding means that many promising firms are stifled — they don’t have enough capital available to invest in the longer-term projects that will help them grow.

The Bank Referral Scheme is designed to help businesses find an alternative if their bank won’t offer them a loan. There is a huge range of alternative finance providers on the market — but these providers and businesses in need of funding struggle to find each other. If the bank says no, many business owners simply don’t know that there might be another way to get funding.

A range of alternatives

Broadly speaking, the Bank Referral Scheme means that banks offer a referral to their customers ‘at the point of rejection’. In other words, when the bank says no, the customer can choose to be referred to a designated finance platform who will then help the business find an alternative source of funding.

Crucially, the business is in control, and can choose to be referred immediately, refer themselves later, or decline a referral.

There are three designated finance platforms, including my business Funding Options. Once we’ve made contact with the referred business, we’ll help them find a lender that fits their requirements from our panel of dozens of providers.

We work with lenders across the whole gamut of business finance, so whether the business is looking for a working capital loan, invoice finance, or a commercial mortgage, we can help them find it. The other designated finance platforms are Bizfitech and Funding Xchange.

As I mentioned, businesses can also ‘self-refer’, which means they’ll contact us at a later date when they’re ready to continue the search for funding. In either case, the process only starts with the customer’s explicit consent.

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Why is the Bank Referral Scheme important?

Hundreds of thousands of UK businesses don’t fit mainstream bank lending criteria every year. Government statistics also show that most business owners spend less than two hours researching their funding options — these two facts combined create a worrying situation.

What’s more, two-thirds of businesses only approach one provider for business funding, and this provider is highly likely to be one of the major banks.

All of these figures paint a picture that might be familiar — business owners deciding they want a loan, going to their bank, getting turned down, and not knowing about the alternatives they could still be eligible for. In this situation, if the business has help in navigating the varied alternative finance market, their chances of finding a solution are much better.

The Bank Referral Scheme has implications for the economy too. A report by Cambridge University’s Centre for Alternative Finance and GLI found that £20bn is lost to the economy every year, because awareness of alternative business funding options is low.

My hope is that the Bank Referral Scheme will help solve this problem. In fact, the scheme is already helping firms find alternative funding options when they’re rejected by the bank, and we’ve already seen some applications go from referral to success within a few working days.


Since its launch on 1st November, the Bank Referral Scheme is helping more businesses find funding when they couldn’t get it with a bank.

If we can achieve this success at a larger scale, while also raising awareness of alternative finance among business owners, the implications for the UK economy are positive and significant.

About the author

This guide has been written exclusively for ByteStart by Conrad Ford, Chief Executive of Funding Options, which was recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016.

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