LONDON (Reuters) - A British government scheme requiring banks to refer small firms rejected for loans to alternative finance providers should be up and running by next year, the managing director of the British Business Bank said.
The scheme is part of government plans to encourage lending to small businesses and fill a hole left by Britain’s biggest banks scaling back lending to bolster capital and meet tougher regulatory rules following the financial crisis of 2007-9.
The Business Bank, which supports lending to small-and-medium-sized firms, said on Tuesday it was inviting potential partners to apply to run online platforms that will put referred businesses in front of alternative finance providers.
“We will definitely want to have something in place by 2016. The banks need to implement it and we need to get the systems right. It’s better that the system is implemented well than we rush it,” Andrew Van Der Lehm, managing director of the British Business Bank, told Reuters.
Britain’s finance ministry said last year that it would require 10 banks including Royal Bank of Scotland, Barclays, Lloyds Banking Group and HSBC to offer businesses whose loan applications they have rejected a referral to alternative finance providers.
Those four banks currently provide around nine out of every 10 business loans but are seeing increasing competition from peer-to-peer lending platforms such as Funding Circle and MarketInvoice. The alternative finance market is forecast to more than double this year.
RBS and Santander have already started steering rejected applicants for business loans to Funding Circle.
Editing by Susan Thomas