The move aims to make it easier for small and medium-sized (SME) businesses to access finance. The platforms are Funding Xchange, Business Finance Compared and Funding Options.
RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank, will all have to offer access to these finance platforms to small businesses whose applications they reject.
If the SMEs give permission, the platforms will then share their details with alternative finance providers and facilitate a conversation between the business and any provider who expresses an interest.
Research shows that 71% of businesses seeking finance only ask one lender and, if rejected for finance, many simply give up on investment rather than seek alternative options.
Last year 324,000 small and medium-sized businesses sought a loan or overdraft, 26% of these were initially declined by their bank and only 3% of those declined were referred to other sources of help.
Chancellor Philip Hammond said: “Small and medium-sized businesses are the backbone of Britain’s economy and it is right they have access to a wide range of sources of finance. A refusal from a big bank should not be the end of the line for a small business and, thanks to the finance platforms being launched today, now it won’t be.”
Keith Morgan, chief executive of the British Business Bank, said the initiative has the potential to make a real difference to smaller business finance markets in the UK.
“It gives businesses additional opportunities to secure funding, alternative providers access to a bigger market of potential clients, and major banks an extra service to offer their business clients when they cannot themselves provide finance.”
Mike Cherry, national chairman of the Federation of Small Businesses, said the reforms will boost alternative lenders and bring more competition and choice into the market.
“Small firms struggling to access finance will now automatically have a new way to get the support they need to invest and grow,” he said.
The news follows the introduction in April of the SME credit data sharing scheme which requires banks and credit reference agencies to share SME credit information equally with all providers. This makes it easier for challenger banks and other lenders to make good credit decisions on businesses and get them the funding they need.