Banks have to help if they reject SME loan applications
According to a Guardian article today, Katrin Herrling felt she had nowhere to go when her bank suddenly changed its lending terms. She had inherited a dairy farm and needed support with her cash flow during the four months of the year the cows weren’t milking. The business was running as usual, but due to a change in policy at the bank (building their balance sheet following the financial crisis), the terms were changed out of the blue.
From today, banks are legally required to refer such cases to an alternative provider under the Small Business Enterprise and Employment Act 2015. The online platforms are: Funding Options, Business Finance Compared and Funding Xchange, which Herrling launched in June 2015.
It’s well known that small businesses find it difficult to obtain finance. In 2013, half of first time borrower SMEs were rejected for finance according to the then Department for Business Innovation and Skills. Consequently, 37% cancelled spending plans. The British Business Bank estimates a funding shortfall of £4bn after approximately 100,000 small business funding applications were rejected. If you’re early stage and you don’t have a trading record, you’re unlikely to receive funding unless you have a strong business case.
The Guardian article talks about Funding Exchange in particular. 85% of entrepreneurs receive funding offers from Funding Xchange. Loan applications range from £5,000 to £250,000. The search is free with lenders paying a small commission on any successful loans. The platform works with small business owners to present their business to the 45 lenders on its site. Lenders then make their offers and – crucially – can see the other offers that are made as well. There have been examples of borrowers saving £2,000 on a £20,000 loan because lenders compete to provide the best interest rates and arrangement fees.
If you’d like to know how to maximise your chances of receiving funding, please give us a free, no obligation call on 01295 477 130 and we’ll be happy to have a conversation. Alternatively, complete the form on this page and we’ll call you.