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Business loan referral program: what does this mean for SMEs?

Banks will soon have to refer SMEs that fail to secure bank finance to alternative lenders. This business loan referral program is a government initiative that was first mentioned two years ago – it’s good news to hear that developments are underway.

Essentially, what this new referral scheme will mean for small business owners in need of business critical funds, is that should one door close – another one could open very quickly. The UK’s Department for Business, Innovation and Skills (BIS) states that seven out of 10 SMEs that were refused a loan by the bank last year, did not pursue funds via alternative finance routes. After being refused once, it’s often challenging to start the daunting process all over again – especially if these businesses are unsure which lender to approach.

When a small business needs financial assistance, whether it be a business overdraft or secured business loan, it’s usually quite urgent. A bank loan application can take months to process and should it be refused, a fast referral to an alternative lender could make a vital difference to the future of that company. The devil is in the detail though and banks could choose to only make a referral once a customer has appealed their loan rejection. For a small business owner in need of fast, flexible finance, this added delay could make business growth and even survival, seem like an impossible dream.

Let’s not get ahead ourselves though, any directive that increases a business’s ability to access finance is positive. Banks are still the first port of call for many SMEs in need of a loan and companies can only benefit from having a Plan B. In fact, a business loan referral program could potentially save SMEs that are financially stranded and can’t get help from their bank.

At Nucleus, we would wholeheartedly embrace the referral scheme. We are committed to helping businesses that can’t get the financial assistance they need from their banks to stay on their feet.

If you’re looking for a fast, flexible and completely transparent alternative lender then speak to us, we can help not just with invoice finance services, but also with secured and unsecured business loans, and business overdrafts

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