The Bank Referral Scheme helps businesses get finance when they can’t secure it with their bank. Since the credit crunch, the major high-street banks have been restricted by regulations designed to make the global financial system safer, and can’t lend to smaller firms like they used to. There is a wide variety of alternative finance that can help, but business owners are often unaware of the options available, or don’t have the time to research them.

The idea behind the Bank Referral Scheme was that when the bank can’t help, it can offer to refer unsuccessful customers to platforms like Funding Options, and we then help the business owners navigate the alternative finance market as quickly and simply as possible.

Preparing for launch

The Bank Referral Scheme has been significant not only for the businesses it helps, but for Funding Options too. The government’s selection and due diligence process began almost 18 months before the scheme finally launched, and we were honoured to be chosen as a designated finance platform.

The designation process also took place in the context of our wider business plan, which was to ‘nail it and scale it’ regardless of the outcome of the Treasury’s selection process. My attitude last year was that we would continue building a scalable business while satisfying the selection process for the referral scheme; but we wouldn’t make it a cottage industry at the expense of our long-term goals.

Gearing up

Compliance and regulatory issues were a big part of preparing ourselves for the future. We transitioned from ‘interim permission’ to full FCA regulation; we passed various security tests including the UK government’s Cyber Essentials Plus information security standard, and a big-four consultancy firm’s audit; and we invested in a new CRM.

At the same time, our office has grown from the high single digits to mid–20s and counting, and we continue to hire aggressively. It’s been a hectic time at Funding Options, but hugely rewarding.

When the scheme launched on 1st November 2016, I was pleasantly surprised — and proud — to see that it didn’t make a significant dent in our daily operations. We’d successfully set up a well-oiled team of specialists, backed up by industry-leading technology — and adding more customers to our pipeline didn’t have any adverse effects on our ability to help them.

A wide range of business types and sizes

I’ve also been struck by the huge range of businesses being referred to us via the scheme. So far we’ve helped everyone from IT consultants to local cash-and-carry shops, up and down the country. And as well as helping a variety of sectors and industries, we’re also helping a range of business sizes via the scheme.

Before launch, more pessimistic commenters thought that it would only be small businesses being referred, but in fact we’ve seen much bigger companies coming to us through the scheme too. For example, we helped an office furniture installation company secure a £500,000 invoice finance facility when their bank was no longer able to service their ledger due to debtor concentration concerns.

At the other end of the spectrum, there are business owners like Douglas Younger, who was looking for a much lower amount for his forklift truck training business. Although he’d been with his bank for a long time, he didn’t fit their lending criteria for an overdraft and was referred to Funding Options through the scheme. We found him the funding he needed to buy a new forklift and hire another instructor, to expand the number of clients he can take on at once.

We’ve also helped businesses with unusual requirements. Another example of the success of the Bank Referral Scheme is Hayley Katsis, a cosmetic nurse who wanted funding to cover the insurance cost of a new international venture. Her bank couldn’t offer her a loan for that purpose, but we found her a lender willing to look at the potential of the project — which never would have been possible without the money.

Conclusion

It has been really heartening to see that we’re helping such a variety of business types and sizes. It also feels like our industry, collectively known as alternative finance, has been vindicated — the more pessimistic predictions of the Bank Referral Scheme have been proved wrong, and we’re only six months in.

Funding Options alone has already delivered millions of pounds in vital finance through the Bank Referral Scheme, and this year we’re on track to deliver a similar quantum of SME lending through it as the bank Appeals Process did in its launch year of 2011 (a scheme which is now considered to be a huge success, and an established part of the UK’s SME finance ecosystem).

Fundamentally, Funding Options is here to help businesses find finance. It has been a pleasure to watch my talented team helping more and more businesses get the finance they need — whether or not they were part of the Bank Referral Scheme.

Conrad Ford is chief executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016.