Small businesses refused loans by banks are to be asked if they want their applications to be passed on to rival lenders under a scheme being launched this week.
The scheme, announced in 2014 by then Chancellor George Osborne, aims to boost lending to companies while breaking the dominance of the Big Four banks over small business loans.
A quarter of all loan applications from small firms are refused and there have been bitter complaints that banks have been slow to lend to new companies since the financial crisis.
Small businesses refused loans by banks are now to be asked if they want their applications to be passed on to rival lenders under a scheme being launched this week
The largest four banks – Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland Group – account for more than 80 per cent of loans to small companies.
The scheme, which will go live today, will push small firms towards alternatives such as peer-to-peer lenders, according to industry sources.
The British Business Bank estimates that about 100,000 small and medium-sized business loans are declined by banks each year – a possible funding gap of £4 billion.
Nine banks will be required to give firms rejected for finance the opportunity to opt to have their applications passed on to either Funding Xchange, BusinessFinanceCompared or Funding Options.
One alternative lender told The Mail on Sunday that it was concerned that companies refused loans by big banks might have poor credit worthiness.
In 2014 an investigation by the Competition and Markets Authority concluded that most small business owners get loans from their main bank with little or no shopping around.