Around 68% of #SmallBusiness owners claim securing funding for their venture is the biggest hurdle they face before launch. Many are rejected by the first few financial institutions they approach and are forced to look at alternative means to raise funds for the venture. The #BankReferralsScheme was initiated in 2016 to help business owners gain sufficient financial assistance from established institutions after they’ve been rejected by other banks. Experts in this field believe this scheme is a step in the right direction but it doesn’t go far enough to help.
The Bank Referral Scheme has a number of flaws and concerns that need to be addressed in order for the system to be friendlier and more effective. Here are some of the most pressing concerns regarding the system:
1. Referral after rejection
Under the current scheme, the businesses are referred to an alternative lender only after they have been rejected by more traditional financial institutions. This is a waste of time and encourages the idea that alternative finance is the last resort instead of a good option to traditional finance. This also limits exposure and awareness of alternative finance options and creates a barrier between small business owners and institutions.
2. Inefficient tracking
This scheme isn’t sufficiently tracked by the government and no tracking information is provided to the target audience. Business owners want monthly reports on the success of the scheme. They want information regarding the number of people referred by the system and how well they fit the purpose of the plan. Business owners also want to know how user-friendly and convenient this system is because the online marketplace can be quite intimidating and overwhelming.
3. No advice and support
One of the biggest problems with this deal is the lack of support offered to business owners. In traditional options, they can call customer service for assistance and more information on the financial products available to them. The Bank Referral Scheme offers a wide range of choices with little support and advice on how to choose the best option. This system relies on algorithms and automated programs to direct business owners to lenders, which isn’t as nuanced and developed as human perception. Many healthy businesses slip through the cracks because the system can’t identify them or doesn’t pair them with the right lenders.
4. Still dependent on banking systems
This scheme aims to provide an alternative to bank loans but there are still several similarities with the banking system and considerable reliance on banks. As the scheme isn’t truly independent, there’s a chance that certain financial products will gain more prominence than others. Traditional banking systems are already accused of pushing products that aren’t suitable or beneficial to customers. This scheme runs the risk of going down the same line.
The current system isn’t refined enough to draw much attention from prospective entrepreneurs. It needs to be developed further in order to be considered a viable alternative to traditional banking systems.
If you would like more information on funding options for small businesses, please do not hesitate to contact us. We Can Build Your Business #SmallBusinessSupport in Manchester can offer solid advice to small businesses. We are happy to help you as we have a team of professional partners on hand who can make a difference to your business success.