Bank Referral Scheme UK: What Happens When Your Bank Declines Your Business Loan

What the Bank Referral Scheme Is

When a small or medium business applies for finance at one of the nine designated UK high street banks and is declined, the bank is legally required to offer that business a referral to one of three government-designated online finance platforms. The business does not have to accept the referral - it is entirely optional - but if it does, the platform connects the business with a panel of alternative lenders who may be willing to provide finance on different terms or with different risk criteria than the mainstream bank.

The scheme was introduced in response to evidence that when SMEs are turned down by their primary bank, the majority simply give up rather than seeking alternative sources of finance. The Bank Referral Scheme directly addresses this by making the alternative market more visible and accessible at the moment a business is most likely to need it.

The Nine Designated Banks

The following banks are legally required to participate in the scheme:

• Allied Irish Banking Group (formerly First Trust Bank)
• Bank of Ireland (UK)
• Barclays
• Clydesdale Bank (and Yorkshire Bank)
• Northern Bank (trading as Danske Bank)
• HSBC
• Lloyds Banking Group
• Royal Bank of Scotland Group (NatWest)
• Santander UK

These banks were designated by HM Treasury when the scheme launched. The list was set at launch; the 2025-2026 HMT consultation considered whether the scope should be expanded.

The Three Finance Platforms

The three designated platforms are specialist business finance comparison services. When a referral arrives, the platform contacts the business and helps match them to alternative lenders on its panel. The process works as follows:

• Alternative Business Funding - connects businesses with a range of alternative finance providers across multiple product types
• Funding Options - a commercial finance marketplace that submits the business's details to lenders who may wish to make an offer. Funding Options is now part of Tide
• Funding Xchange - returns indicative quotes from its panel of lenders (70+ providers) in a standardised format, allowing comparison. Lenders cannot contact the business directly until the business chooses to proceed with an offer

Platforms are free for the business to use. They generate income by charging lenders a commission when a facility is successfully arranged. There is no obligation to proceed with any offer received through the platform.

What Types of Finance the Platforms Can Provide

The Bank Referral Scheme covers a wide range of business finance products. Through the designated platforms, businesses can access:

• Term loans and unsecured business loans
• Asset finance (hire purchase, finance lease)
• Invoice finance (factoring and discounting)
• Revolving credit facilities and overdrafts
• Commercial property finance
• Government-backed and not-for-profit lenders

The scheme does not cover equity finance. Platforms are not able to provide angel investment, venture capital, or other equity products through the referral mechanism.

What to Expect If You Are Referred

If the bank obtains your consent to refer, your details must be passed to the designated platform by the end of the next working day. The platform will then contact you to gather additional information about your funding requirement. You will typically be asked:

• How much finance you need and what it is for
• Your business turnover and trading history
• What type of finance you are looking for

Using the platform does not trigger a hard credit search and will not affect your credit score at the initial enquiry stage. If you proceed to a full application with a specific lender through the platform, that lender will carry out its own credit assessment.

Why Banks Decline and What It Means

Being declined by a bank does not necessarily mean a business is not fundable. Banks decline businesses for a range of reasons that have nothing to do with the viability of the business itself: the business may be too young to meet the bank's minimum trading history requirement, may not have enough trading history on its bank account, may have a specific asset type that the bank does not finance, or may simply fall outside the bank's current risk appetite for a particular sector.

Alternative lenders assess credit risk differently. An invoice finance provider cares primarily about the creditworthiness of the business's customers, not the business itself. An asset finance provider focuses on the asset being financed. A specialist sector lender may have deeper appetite for a sector that mainstream banks treat cautiously. The Bank Referral Scheme exists precisely to connect businesses with lenders whose models and risk appetites better match what a business actually needs.

The May 2026 Reform Consultation

HM Treasury published its response to the Bank Referral Scheme consultation on 11 May 2026. The consultation, which closed in December 2025, considered whether the scheme could be enhanced. Key changes the government plans to take forward include requiring banks to provide declined businesses with reasons for their rejection (where not unlawful to do so), and reviewing whether the scope of businesses and finance types covered by the scheme should be expanded. The scheme remains operational under its current rules while reforms are developed.

Approaching Platforms Directly

You do not need to wait for a bank to decline you before using the designated platforms. Businesses can approach Alternative Business Funding, Funding Options and Funding Xchange directly at any time, without needing a bank referral. The mandated referral process simply ensures that declined businesses are actively offered the option rather than having to find it themselves.

What is the Bank Referral Scheme?

The Bank Referral Scheme requires nine designated UK banks to offer small businesses a referral to one of three government-designated finance platforms when they are declined for business finance. It was launched in November 2016 under the Small Business, Enterprise and Employment Act 2015, and is administered by the British Business Bank.

Which banks have to participate in the Bank Referral Scheme?

The nine designated banks are Allied Irish Bank, Bank of Ireland UK, Barclays, Clydesdale Bank, Danske Bank, HSBC, Lloyds Banking Group, NatWest/RBS, and Santander UK. These banks are legally obliged to offer a referral when they decline a business finance application.

What are the three designated finance platforms?

The three platforms are Alternative Business Funding, Funding Options, and Funding Xchange. Each connects declined businesses with a panel of alternative lenders offering products including term loans, asset finance, invoice finance, and revolving credit. All three are free for the business to use.

Does using the Bank Referral Scheme affect my credit score?

No. Using the designated platforms does not trigger a hard credit search and does not affect your credit score. If you proceed to a full application with a specific lender through the platform, that lender will carry out its own credit assessment at that stage.

Do I have to accept a referral if the bank offers one?

No. The referral requires your consent, and you are under no obligation to accept it or to proceed with any offer you receive through the platform. You can also approach the platforms directly without needing a bank referral first.

What types of finance can I access through the Bank Referral Scheme?

Term loans, asset finance, invoice finance, revolving credit and commercial property finance are all accessible through the scheme. Equity finance is not covered - the platforms do not provide angel investment or venture capital through the referral mechanism.