Bank Referral Scheme: Financial support if you're turned down for bank finance

The Bank Referral Scheme was introduced to offer debt finance to businesses that had applied for a bank loan or overdraft and been refused.

In this blog, we explain how the scheme works, which banks are involved, and how businesses refused bank finance can take advantage of the scheme.

Why was the Bank Referral Scheme introduced?

Before the government set up the scheme back in 2016, hundreds of thousands of small and medium-sized business were applying for a bank loan or overdraft. Of that number, a quarter were initially declined by their bank, and yet only 3% were referred to other sources of finance.

There are several hundred finance providers in the UK, but many business owners don't have the time to research the market and identify finance that's right for them. A significant number simply seek finance from their local bank and give up if refused.

The aim of the scheme is to connect these businesses with other sources of finance.

How does the scheme work?

If you apply to one of the major banks (see below) for finance and are refused, by law the bank must offer you a referral to the three government-approved finance platforms on the Bank Referral Scheme. These are:

• Funding Xchange

• Funding Options

• Alternative Business Funding

You can choose to be referred to one or more of the three platforms, or you can decline the referral altogether. The scheme operates for debt finance between £1,000 and £25 million.

Which banks must refer businesses via the scheme?

The banks required by law to refer businesses are:

• RBS

• NatWest

• Lloyds

• HSBC

• Barclays

• Santander

• Clydesdale and Yorkshire Bank

• Bank of Ireland

• Danske Bank

• First Trust Bank

What information does the bank send to the finance platform?

• Your business's name and contact details

• The amount and type of finance you've requested

• Your business' legal structure (for example, sole trader, partnership or limited company)

• The length of time you've been trading

• The date you need the finance and/or made the application

What does the platform do with my information?

The information the bank provides to the platform as part of the referral may not be enough for the platform to be able to offer you finance. Consequently, it may contact you to ask for more details.

Each platform will have as finance suppliers providers of business loans, overdrafts, credit cards, asset finance and invoice finance. (The Bank Referral Scheme does not offer equity finance.)

The platform decides which of the above types of finance will be most appropriate for your business, then refers you to the relevant suppliers. It's up to each individual finance supplier to decide whether to offer you finance to the business and, if so, under what terms.

How does the scheme benefit the finance platforms and their suppliers?

If the finance supplier makes you an offer of finance and you accept, the platform receives commission from the finance supplier to cover its costs.

From you, the finance supplier receives the repayments of the finance it borrowed, plus interest.

Is using the finance platforms safe?

The designated platforms must have strong systems in place to prevent customers' information being lost, corrupted, destroyed, misused or accessed by people who aren't unauthorised to see it. Each platform has been fully vetted by the government’s British Business Bank.

Looking for finance for your business?

Personalised finance options for start-ups, small businesses, sole traders and freelancers. Take the Funding Hub tool and get recommendations tailored to your financial needs.

Relevant resources

• Small business funding: How much money should you ask for?

• Small business funding: How to choose the right type for you

• A guide to securing small business finance from lenders other than banks