ONE OF the first business finance aggregators to take part in the Bank Referral Scheme has quietly left the government initiative.
Sources close to the Treasury have told Peer2Peer Finance News that Business Finance Compared left the scheme in spring 2018, and while the departure was amicable there was some frustration in the department due to the efforts that had been made to onboard the platform.
It is thought that Business Finance Compared has decided to focus on more innovative products using Open Banking. There are no plans to onboard a new finance aggregator to the scheme as a replacement.
The Bank Referral Scheme was launched in November 2016, mandating nine of the UK’s high-street banks to pass on the details of rejected business borrowers to designated finance aggregator platforms, who can then make referrals to alternative finance firms such as peer-to-peer lenders.
The designated aggregators are now Funding Xchange, Funding Options and Alternative Business Funding, which was added in November 2017.
However, the scheme has been the target of criticism due to perceived low take-up. In October, MPs on the Treasury Select Committee called for wider promotion of the initiative to ensure that small- and medium-sized enterprises (SMEs) are aware of alternative finance options available.
Government figures showed that fewer than three per cent of small businesses referred to alternative lenders via the scheme obtained finance in its first nine months following the launch, but more recent data in the 12 months to August 2018 showed the conversion rate is now above 10 per cent.
It is thought that the Treasury is happy with the take-up of the scheme and notes that the figures are not reflective of the whole alternative business finance market.
The other designated aggregators are understood to be happy with the scheme and are seeing growing volumes of business, so have no plans to leave.
And P2P lenders have reported successful results from the scheme. In August, Alternative Business Funding facilitated a £250,000 loan to a developer through Blend Network after the borrower had been rejected by Barclays.
P2P lender JustUs has been trialling the scheme through Funding Options and is happy with the results.
“We get daily referrals and probably accept double the amount of applications than those that come direct as they are already filtered,” said Lee Birkett, founder of JustUs.
“It has been a success for us and we are in discussions with the other aggregators.”
Business Finance Compared, the Treasury, Funding Xchange, Funding Options and Alternative Business Funding declined to comment.
This article featured in the December issue of Peer2Peer Finance News, now available to read online.