Lloyds Bank expects “many thousands of customers a month” to be passed into the formal finance referral scheme when it goes live next year, according to its Head of Business Development for SME Lending, Andy Bishop.
Speaking at the Financial Professionals’ Show at Olympia this week, Mr Bishop went on to say that, while the precise numbers are still being worked on, Lloyds was “desperate for the scheme to work” because it was vital to retaining customer relationships over the longer term. “Our responsibility doesn’t end with a ‘yes or ‘no’ decision”, he said. “We want to ensure that, if we can’t help, the customer finds the right money on the right terms from another source”.
The other High Street banks will undoubtedly be thinking along similar lines and making their own calculations about possible volumes.
The scheme, however, is still a long way from being in place, even though the legal framework for it to happen – under the Small Business, Enterprise and Employment Act – went onto the statute book on March 26, 2015.
When The Marketing Eye enquired on Friday, a spokesperson from the British Business Bank (BBB), which has been charged with implementing the scheme, said: “As this scheme is truly ground-breaking and the first of its kind, it required both primary and secondary legislation to be passed – this has now been laid in Parliament. A competitive process has also been undertaken by the British Business Bank to inform advice to HM Treasury on which finance platforms are suitable for designation. The BBB is scheduled to get full advice to HM Treasury in Spring 2016.”
“Once finance platforms are designated, the (10) designated banks will undertake work to test and implement systems.” And the crucial part: “The intention is for the process to go live in the second half of 2016.” Taken literally, it could be a year from now before we see the machinery actually take form.
In the meantime, it has become clear that the scheme will only apply to applications for finance that are declined by the banks' formal credit processes, meaning the much greater number of enquiries that never reach the stage of full application – that is, those effectively declined ‘in branch’ – will still remain unserved. There are no definitive numbers for this group, but what we do know is that many SMEs simply give up their search for external finance at this stage.
The challenge, therefore, remains: to raise awareness and understanding of the much wider range of options that are available to the country’s 5.2 million SMEs through alternative finance. This is a task that needs to be shared by the Altfi industry, Government, members of the finance broker community and, yes, even the banks themselves.