Figures released this morning (31 August) showed in the last 12 months, 670 businesses raised more than £12m of funding through the scheme, four times the amount raised in the previous year.
Since it was introduced in November 2016, more than £15m has been sourced for businesses across the country and more than 900 British businesses have been matched with alternative lenders, the government said.
The bank referral scheme was created by the Small Business, Enterprise and Employment Act 2015 to allow the UK government to keep an eye on businesses and their requests for business finance.
It allows businesses rejected by a high street lender to have their details referred on to designated finance platforms, which will then seek to help them get a loan from alternative lenders.
John Glen, economic secretary to the Treasury, said: "From breweries to beauticians, more than 900 British businesses have been matched with the funding they need to grow since we introduced our scheme.
"Small businesses are the backbone of Britain, yet many give up on their plans to expand if they can’t get a loan from their bank. Now however, thanks to our match-making scheme, they have another shot."
Under the scheme, businesses are automatically offered the opportunity to be referred to three online credit brokers, including Alternative Business Funding, Funding Options and Funding Xchange.
Each platform provides businesses the access to a range of lenders and products, including business loans, revolving credit, asset finance and invoice finance.
Over the past year, loans resulting from the scheme ranged from as little as £100 to £1.3m and the average size of a loan secured was £17,285.
But Alan Chan, director and financial planner at IFS Wealth and Pensions, warned businesses should read the fine print of Bank Referral Scheme loans to avoid making a "costly mistake".
He said: "The scheme is a good idea in principle because banks aren’t the only place to get funding and there are a lot of specialist lenders that are not on the high street.
"As with any loan, it’s important to fully understand the repayment terms and to read the small print. If there’s any doubt as to what they’re getting themselves into, then they should always trust their instincts and get some professional legal advice before they make a costly mistake."
Alice Hu-Wagner, managing director for strategy, economics and business development at the British Business Bank said: "One of our key objectives at the British Business Bank is to encourage and enable smaller UK businesses to seek the finance best suited to their needs.
"Just over half of smaller businesses consider only one provider when they need funding, however, with over a quarter putting their plans on hold or giving up altogether if they aren’t offered the full amount they were seeking."
rosie.quigley@ft.com
