We’re receiving an unprecedented volume of enthusiastic reaction to today’s news that a mandatory referral scheme will be imposed upon the banks.
At this morning’s launch of Innovate Finance, George Osborne unveiled a number of measures that are set to cement the position of the UK as a world leader in the fintech space. Perhaps the most exciting announcement for the alternative finance providers was the confirmation of the much-discussed referral system – forcing high street banks to direct the businesses which they reject for finance along to alternate funding providers.
We’ve collected a wide range of reactions from key players within the peer-to-peer lending and invoice finance sectors below.
"We applaud the government for again showing its commitment to supporting greater diversity and competition in the small business lending market. The success of this scheme will depend on simplicity and ease of use for business owners.
"In June we announced a formal referral partnership with Santander, who will refer small business customers to Funding Circle where we are better placed to help. We are working with their relationship managers to help raise awareness of alternative finance. This acts as a blueprint for how banks and non-bank lenders can work together in the best interests of small business owners.
"Non-bank lending to small businesses has exploded over the last four years and is expected to account for £12 billion per year over the course of the next decade. Nearly 5,500 businesses have today successfully borrowed money through Funding Circle, highlighting the enthusiasm and appetite for marketplace lending."
“At last, the beating heart of the UK economy will be offered financial solutions from alternative sources. As the gulf between ambitious SMEs and traditional financial institutions widens, it is essential that entrepreneurs are made aware of the other viable options available.
The Chancellor’s announcement today provides a lifeline to those businesses whose hopes have been diminished after having their funding requests denied by banks. Instead, the government is catalysing change, stimulating competition to high street lenders and sending a message to borrowers that there are now genuine funding alternatives. Rather than being deterred after being blocked by banks, companies will be made aware of the capital available to them, or to the individuals themselves through peer-to-peer platforms.
The result will be that banks can no longer rely on their names and reputations to attract the business of Britain’s fledgling companies, forcing them to either improve their offering or recommend their rivals”.
Giles Andrews, Founder and CEO of Zopa:
“We very much welcome today’s announcement by the Chancellor on The Small Business Bill as a vital step towards ensuring more businesses have access to the finance they need to help them grow. This will help refer thousands of businesses to the likes of Zopa and the other alternative finance lenders by providing more choice and competition to the UK finance sector as well as helping create jobs and growth.”
“This will be a major breakthrough for the UK’s businesses which have been struggling to access the finance they require from traditional sources.”
“The recent Trends in Lending report from the Bank of England confirms that the Funding for Lending Scheme does not go nearly far enough to address the lack of funding available to SMEs. We know that the High Street banks currently turn away around 40 per cent of loan applications from SMEs and evidence suggests that around one fifth of those do not approach providers of alternative finance because they are simply unaware of what is available. Legislation to direct the banks to pass these customers on to alternative sources is a major step forward. The alternative finance providers stand ready to help these businesses and get the UK economy firing on all cylinders.
“We are particularly encouraged by the Chancellor’s pledge to ‘cement the UK’s position as the FinTech capital of the world’, which is precisely what the Alternative Finance sector has been seeking to achieve. It shows that the Government has been listening and reinforces the position of alternative finance in the mainstream financial services marketplace”.
"We welcome the Government's commitment to making the UK a global fintech leader. Helping businesses access alternative finance can provide an important boost not only to alternative finance providers, but also to small businesses and the broader economy. The more businesses understand about the finance options available to them, the better deal they will get, and the better opportunities they will have to grow."
"Technology has completely changed major industries from travel, to retail, to publishing; financial services will be the next industry to feel the full weight of technological change. Alternative finance providers are not just complimentary to the established old guard, they have the potential to replace them. Alternative finance offers faster, simpler, more affordale products and comes without the tarnished legacy of traditional finance companies.
"Companies like MarketInvoice are making this change happen - businesses that use our services aren't going back to banks."
“Osborne’s plan to require banks to refer rejected SME borrowers to alternative providers is good in principle, but part of the problem with banks is that they often take several months to approve or reject a loan application, compared to around two weeks for most alternative finance providers. As a result, many rejected businesses will have wasted three months already, and will often have missed the opportunity that they needed the money for.
"What is needed is greater awareness of alternative sources of finance at the application stage, so that businesses can make an informed decision before they invest significant time and effort into bank loan applications. Otherwise, we risk obstructing the growth and job creation necessary to create wealth and help to lead Britain well into a full recovery.
"So while we'd welcome it in principle, we're also focusing on the present and doing our best to inform SMEs through as many channels as possible. We want them to be aware of all of the options available to them from the start - not just when the banks say 'no'".
You can view the complete article on today’s announcement here.