Businesses that get turned down by their banks for finance will still have many other options available to them to secure the funds they need, advises Top 40 accountants, Bishop Fleming.
The firm was highlighting a new legal obligation on high street banks to refer businesses who have been refused finance to an alternative provider, at the same time emphasising the advantage of seeking professional advice before approaching any lender to significantly increase the chances of success.
Bishop Fleming partner, Andrew Sandiford, commented: "Historically, a business would have gone to their bank, asked for an overdraft and probably got it. That is unlikely to happen now. But alternative funding is out there, it just takes a lot of hunting to get the right sources which is why businesses need to seek professional advice at the outset. Just because a bank won't lend you the money does not mean you have a bad business, or that other forms of finance are not available."
Since 1 November 2016, nine of the UK's major banks have been forced to refer businesses they have turned down for finance to three government-approved alternative options - Funding Xchange, Business Finance Compared, and Funding Options.
These three platforms will then pass on the details of the business to a range of alternative finance providers and facilitate discussions between the business and any interested financier.
Mr Sandiford warned that whilst comparison websites are nothing new and access to a wider range of lenders was very welcome, the key to a successful bid could come down to how well the application had been presented in the first place, and whether the right type of lender had been approached for the particular type of finance required.
The Bishop Fleming partner appeared before a Parliamentary Select Committee earlier this year that was looking into business finance. He told MPs that the financial markets had changed dramatically since the 2008 financial crash and were now far more complex and not as easy to navigate. As a result, he warned that approaching high street banks for finance was not always the best course of action as there were newer entrants to the market offering asset-based finance.
Referring to the recent change in the law, Mr Sandiford remarked: "I think mechanistic signposting to an asset-based lender, because that is what the computer churns out, is perhaps not going to achieve a great deal. More engagement would be hugely helpful.
He continued, "Indeed, businesses need to be aware that going straight to their banks for further funding isn't necessarily the right approach to take. There is a real need for assistance to navigate today's very complex and fragmented market, and those who seek professional advice and have knowledge of the networks are likely to be the most successful at getting the results they need."