Starting your own business can be one of the most rewarding ventures, as entrepreneurs give wings to their dreams and get their business off the ground.
Most small to medium size enterprises will need to apply for funding to successfully build their business, however in the wake of the recent recession, many small business owners are facing rejection from their usual lenders. The latest figures have revealed that the UK banks reject almost half of all new business loan applications, and staggeringly nearly 40% of these rejected applicants will not pursue alternative funding.
With so many new businesses failing to launch, it is clear that the Governments projected economy growth is going to be much slower than first thought unless entrepreneurs receive a great deal of help. Fortunately, the Chancellor has noticed this issue, and as a result has launched a campaign to look at alternative funding platforms that could help small business owners who have been rejected by traditional lenders get off the ground.
There are many alternative sources of finance available to SMEs, including crowd funding and merchant cash advances, however many people do not know of their existence. The Government investigations have also discovered that of the high street banks rejecting these SME funding requests, very few refer the applicants to alternative funding sources, and the chancellor proposes that legislation be implemented to prevent this from happening.
If imposed, banks could find themselves in the unusual position of helping new businesses by referring them to a more suitable lender, as the legislation will force banks to share the details of unsuccessful loan applicants to enable other lenders to fast track the lending process if approved. It is also hoped that the new legislation would help to reduce the competition in the SME lending market, as new businesses become more aware of the funding options available to them and become less reliant on the big high street banks.