The bank referral scheme is a government-backed initiative that requires major high-street banks to connect rejected SMEs with alternative business finance platforms. It exists because the government recognised something that business owners already know: being told “no” by your bank doesn’t mean your business isn’t viable. It just means you didn’t fit that particular lender’s criteria.
What Is the Bank Referral Scheme?
The bank referral scheme in the UK was introduced in November 2016 under the Small Business, Enterprise and Employment Act 2015. The scheme was created to tackle a specific problem: research showed that when SMEs were turned down for lending by their main bank, the majority simply gave up.
The British Business Bank estimates that around 100,000 businesses have their applications for debt rejected every year, representing a potential funding gap of billions of pounds. That’s not just a statistic. Behind each of those numbers is a business owner who needed capital to grow, hire, invest, or survive, and walked away empty-handed because they didn’t know where else to turn.
Under the scheme, nine of the UK’s largest banks are legally required to offer a referral to rejected SME applicants. Those nine designated banks are Barclays, HSBC, Lloyds, NatWest (RBS), Santander, Bank of Ireland, First Trust Bank, Virgin Money, and Danske Bank. When any of these banks declines a business finance application, they must offer the business the opportunity to be referred to one of three government-designated finance platforms: Alternative Business Funding, Funding Options, and Funding Xchange.
The process is consent-based. Your bank will ask for your permission before sharing any details. If you agree, your information is passed to the platforms, which then share it anonymously with their panels of alternative business finance lenders. Any lender interested in working with your business can then get in touch. Your credit score is not affected by the referral itself.
Who Qualifies for the Bank Referral Scheme?
The scheme is available to any business that meets a few straightforward criteria. Your business must have a turnover under £25 million, a UK address, and carry out commercial activities as its main purpose. It must not be part of a group with an annual turnover exceeding £25 million. The finance products covered include bank loans, overdrafts, credit cards, invoice finance facilities, and hire purchase, essentially the core lending products most SMEs apply for.
Importantly, you don’t need a clean credit history to qualify for the referral. The scheme exists precisely because different lenders have different appetites for risk. A business that doesn’t fit the profile for a high-street bank may be entirely fundable through an alternative provider that takes a more flexible approach to things like adverse credit, limited trading history, or unconventional business models.
Has the Scheme Actually Worked?
By the end of Q3 2024, the scheme had facilitated around 5,400 deals worth just over £128 million, with an average deal size of roughly £24,000.
Given that gross lending to SMEs in 2024 alone was around £62 billion, the scheme’s direct contribution has been relatively small. There are several reasons for this. Take-up among referred businesses has been lower than expected, partly because some business owners are wary of sharing their details with unfamiliar platforms, and partly because the process itself can feel impersonal at a moment after a rejected application.
Challenger and specialist banks now account for around 60% of gross new SME bank lending, up from roughly 30% when the scheme was designed. The nine designated banks no longer dominate the market the way they did a decade ago, which means a growing number of SME rejections happen outside the scheme entirely.
The government has recognised these shortcomings. HM Treasury consulted on the future of the Bank Referral Scheme between October and December 2025. In its May 2026 response, the government confirmed that it does not plan legislative change to the scheme at this stage. Instead, it has invited the financial services sector to develop industry-led proposals to improve referrals and SME outcomes by 18 December 2026.
Why the Scheme Is a Starting Point, Not a Solution
Even with its limitations, the bank referral scheme serves an important purpose: it puts the idea into your head that alternatives exist. That distinction matters more than the mechanics of the scheme itself.
The reality for many business owners, especially those dealing with adverse credit like CCJs, CVAs, or winding-up petitions, is that the referral platforms may not be enough on their own. They cast a wide net, but the process is largely automated and may not account for the specific circumstances of your business. A platform might match you with lenders, but it won’t necessarily package your application, explain your situation, or negotiate terms on your behalf.
