It sounds like a ‘once upon a time’ story, which started a few years back and has not reached to its desired end yet. Yes, the hint is of ‘Bank Referral Scheme’ that came into existence through the ‘Small Business, Enterprise and Employment Act 2015’ and was launched in November 2016. It seems that the scheme still has many miles to go to reach its actual aim and even then, maybe the desired result does not appear.

What is behind the concept of Referral Scheme?

The SME businesses that do not succeed in their credit application procedure with a bank will be asked (with their permission) to have their financial details passed to the selective finance platforms. These will contact the businesses within a decided period.

  • The number of selective platforms is 3 –
  • Funding options
  • Funding Xchange
  • Alternative Business Funding

How the scheme works

A statutory duty is given to the selected high street banks of the UK. Their work is to pass on the financial information of the businesses failed to qualify for the funds, to the designated alternative finance platforms.  They will then call the concerned firms to refer them to the alternative fund providers.

  • Alternative finance providers include –
  • Revenue-based financing
  • Online British lenders
  • Equity crowdfunding
  • Peer-to-peer consumer and business lending
  • Revenue-based financing
  • Invoice trading

Where exactly is the clash?

A point has become the cause of chaos and clash in the implementation of the scheme. Among the businesses that fail to get approval from high street banks, details of less than 24% of companies have been forwarded to the selective funding platforms.

This means the scheme is not working in the way it was supposed to. This hurts the expectations that the SME businesspersons had with the ‘referral’ system.

Now What?

In such situations, the attention is sure to divert on the fund sources that the business class finds more convenient. According to the choice, they need a platform that is faster and reliable. Much time has been spent in waiting for the due response of bank referral, now is the need for a comprehensive solution.

Direct lending has come up as a promising option

To compensate for the loss due to delay in availing funds, most of the businesses are inclined to direct lending. This is a better platform in terms of speed and facilitates funding faster and timely.

  • Loan types in demand

The search is on the financial options that are easy to consume to the maximum level with no regrets. The focus is on the versatile options.

  • Business loans

  • These are in easy reach through online lending and services to multiple purposes. For long-term needs, a significant amount is available with the condition of guarantor and collateral on a wide range of cheap rate quote options.


  • Unsecured funding

    When the requirement of funds is urgent, and the amount need is small, the unsecured loans are better options. The features of instant approval decision and immediate fund disbursement make these loans even more appealing.

The world of trade survives on realistic solutions and wherever ‘That Needed Solution’ is available, the wave is sure to divert the crowd there.

Prime features of direct lenders

There should be some reasons to catch the attention of the fund seekers. The direct/next generation online lenders are doing well on that part with the help of following features.

  • Brief application procedures

In business, time means money; timeliness means profit and delay mean loss. Online loan procedures are fast and complete in a few steps. Apply, get approval decision and receive funds.

  • Bad credit rating and fair credit rating are acceptable

Unlike the banks, the lenders online accept applications despite bad credit. They work on the logic of repayments, and the applicant should have a satisfying current income status or annual turnover. If the applicant is okay on this aspect, it does not matter if the credit rating is between 561-720(bad) or 721-880(fair).

  • More personalised deals

Mainstream lenders have set rules, and they cannot customise a deal beyond that. In the online lending, the decisions are on the discretion of the lender, and it can give more relaxation in rates. The only game is about the capability of fund seeker to convince the lending company through a strong financial capacity to afford the loan. As a result, the instalments are low and paying them on time is not difficult.

This helps explicitly the poor credit borrowers who by making timely repayments can earn a boost in the credit rating. Double benefits of Timely Funds and Improved Credit Score Performance. Not bad!

  • No need of brokers

The term ‘direct lending’ denotes the exact nature of online loans. There is no compulsory existence of broker in the loan procedures. Just search online, finalise a lender, apply and get money if approved. This saves a lot of time as well as a lot of money on brokerage. It is a significant factor that helps make the journey of borrowing smoother.

  • Paperless procedures

Again a convenient feature. The whole process goes online and is 100% paperless. It is a reason for relief and prevention from massive filing and faxing formalities that seems endless like the ocean.

Many more ways and sources are sure to come in business funding in the future. However, the only thing that is sure to survive at last is the source that provides ACTUAL solutions. If online lending, which is also called as next-generation online lending can do that, it can always stay without the need of a successor.

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