The number of services that allow small company managers to scan the market for financing options continues to grow. Traditional commercial finance brokers remain an important source of finance for many businesses, but they have been joined over the past few years by a growing number of online services that have links with finance providers and allow would-be small business borrowers to assess their options through a web-based marketplace, very much as Moneysupermarket, Compare the Market and their rivals do in consumer finance. Usually, these services are dominated by newer, non-bank finance providers but in some cases banks are also present on the panels.
Among the established online services, four are now part of the government's mandatory referral scheme, whereby businesses that are rejected for finance by one of the UK's nine leading banks must be offered a referral to these services, who will then try to link them with alternative sources of funding. Users enter details of their business and the funding they are looking for into a web-based questionnaire and receive recommendations on who to approach. In some cases, they can complete an online application immediately and receive an answer within hours or even minutes.
The four online services, Funding Options, Funding Xchange, Business Finance Compared and Alternative Business Funding are essentially web-based commercial finance brokers and will therefore usually be paid a commission from the finance providers on deals that go through.
At the beginning of this year, another player entered this market. The Federation of Small Businesses has launched its own automated online matching service, dubbed the FSB Funding Platform. This allows users to make a single anonymous application and receive offers of finance from multiple providers before deciding which they want to pursue. The FSB also promises that "dedicated finance advisers are on hand 24/7 to support your application."
Access to the FSB Funding Platform is free for paid-up FSB members, and although that means businesses using it won’t indirectly fund a commission payment to the service that introduced them – as they would when using a conventional finance broker – they will still pay whatever arrangement fee the lender routinely charges.
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