Published by Gbaf News
Posted on November 29, 2016
7 min readLast updated: January 22, 2026
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Andrew Whelan, Chief Executive Officer at GLI Finance
The bank referral scheme has the potential to be a game changer for the alternative finance sector. Launched earlier this month, it is now compulsory for the UK’s top banks to refer SMEs whose funding applications they reject to alternative providers in the sector.
Developed in response to businesses not getting the financial support they need to grow, its introduction represents a significant step forward for SMEs and marks the culmination of hard work across industry, regulators and government. I am also personally delighted that Funding Options, one of GLI’s prioritised platforms (held within its newly created investment vehicle FinTech Ventures Limited), is one the Government’s designated finance platforms for the scheme.
Research published by the Department for Business, Innovation and Skills (BIS) back in 2013 found that half of first time borrower SMEs were rejected for finance, and of these, 37% did not attempt to seek out alternative options but cancelled their spending plans altogether. Their reluctance to seek out non-traditional bank finance was fuelled by a lack of awareness of alternative providers with less than a third of those surveyed aware of business angels, export/import finance or peer-to-peer lending, and less than 12% aware of crowd sourcing or mezzanine finance. It is hoped that the new scheme can go some way in tackling this issue.
However, despite the progress it symbolises, it is important that the introduction of the scheme acts as a stepping stone to further change for SMEs, rather than being an end in itself.
Work published earlier this month by the Business, Energy and Industrial Strategy (BEIS) Select Committee highlighted the challenge that still lies ahead.The ‘Access to Finance’report revealed that a lack of awareness of alternative options amongst SMEs was their main barrier to growth and outlined that more must be done in order to counter this.
Amongst its recommendations the report requested the British Business Bank to conduct a review of the knowledge of the range of alternative finance providers on the market and the products available to SMEs in order to gain a better understanding of the current levels of awareness. It also tasked the organisation with setting out a strategy detailing exactly how the sector can be promoted to those involved in giving face-to-face advice to SMEs such as the accountancy, legal and banking sectors.
Such measures would help pinpoint exactly where greater awareness needs to be promoted and identify the best means of doing so. In this way, both the government and alternative finance sector will be able to set out the next steps they must take to ensure SMEs are able to secure the funding they need.
Importantly, the Committee also asked the Government and British Business Bank to focus on support for the ‘scale-up’ and growth stages of SMEs and recommended they work with investors to target this demand. Ensuring such businesses receive appropriate funding is crucial not only to the businesses, but to the economy as a whole.
The referral scheme is an excellent proof point in the development of the sector over the last few years. To be actively promoted and positioned as a credible source of finance to SMEs by the Government is testament to the importance of the alternative services we provide. That said, it is key that further action is taken in order to continue this momentum and ensure SMEs are aware of all of the options available to help them succeed going forwards.
Driving further awareness will prove crucial in enabling the alternative finance sector to continue on its current growth trajectory.The launch of the scheme is only the beginning.
Andrew Whelan, Chief Executive Officer at GLI Finance
The bank referral scheme has the potential to be a game changer for the alternative finance sector. Launched earlier this month, it is now compulsory for the UK’s top banks to refer SMEs whose funding applications they reject to alternative providers in the sector.
Developed in response to businesses not getting the financial support they need to grow, its introduction represents a significant step forward for SMEs and marks the culmination of hard work across industry, regulators and government. I am also personally delighted that Funding Options, one of GLI’s prioritised platforms (held within its newly created investment vehicle FinTech Ventures Limited), is one the Government’s designated finance platforms for the scheme.
Research published by the Department for Business, Innovation and Skills (BIS) back in 2013 found that half of first time borrower SMEs were rejected for finance, and of these, 37% did not attempt to seek out alternative options but cancelled their spending plans altogether. Their reluctance to seek out non-traditional bank finance was fuelled by a lack of awareness of alternative providers with less than a third of those surveyed aware of business angels, export/import finance or peer-to-peer lending, and less than 12% aware of crowd sourcing or mezzanine finance. It is hoped that the new scheme can go some way in tackling this issue.
However, despite the progress it symbolises, it is important that the introduction of the scheme acts as a stepping stone to further change for SMEs, rather than being an end in itself.
Work published earlier this month by the Business, Energy and Industrial Strategy (BEIS) Select Committee highlighted the challenge that still lies ahead.The ‘Access to Finance’report revealed that a lack of awareness of alternative options amongst SMEs was their main barrier to growth and outlined that more must be done in order to counter this.
Amongst its recommendations the report requested the British Business Bank to conduct a review of the knowledge of the range of alternative finance providers on the market and the products available to SMEs in order to gain a better understanding of the current levels of awareness. It also tasked the organisation with setting out a strategy detailing exactly how the sector can be promoted to those involved in giving face-to-face advice to SMEs such as the accountancy, legal and banking sectors.
Such measures would help pinpoint exactly where greater awareness needs to be promoted and identify the best means of doing so. In this way, both the government and alternative finance sector will be able to set out the next steps they must take to ensure SMEs are able to secure the funding they need.
Importantly, the Committee also asked the Government and British Business Bank to focus on support for the ‘scale-up’ and growth stages of SMEs and recommended they work with investors to target this demand. Ensuring such businesses receive appropriate funding is crucial not only to the businesses, but to the economy as a whole.
The referral scheme is an excellent proof point in the development of the sector over the last few years. To be actively promoted and positioned as a credible source of finance to SMEs by the Government is testament to the importance of the alternative services we provide. That said, it is key that further action is taken in order to continue this momentum and ensure SMEs are aware of all of the options available to help them succeed going forwards.
Driving further awareness will prove crucial in enabling the alternative finance sector to continue on its current growth trajectory.The launch of the scheme is only the beginning.
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