Finance has always been a bit of a sore spot for small businesses. A growing mistrust in institutional banking has led to the emergence of alternative finance platforms such as crowdfunding and peer-to-peer lending. While these options tend to boast concepts that are innovative and flexible, not all firms have the financial capacity, or indeed the willingness, to embrace them.
With the Brexit deadline steadily approaching, businesses need financial stability over everything else. In other words, business owners need the assurance that any increase in business fees or consumer goods will not make them the next insolvency statistic. This move by Santander could ease some of the financial anxiety for many of these smaller firms.
This new fund will be provided by the Royal Bank of Scotland, who has been forced to pay £775 million to improve business banking after accepting a £45.5 billion bailout during the financial crisis.
Santander will offer small businesses an account costing £12.50 a month and will return cash, based on their turnover, of between 1 per cent and 3 per cent, with a maximum of £300 a year. With many bank loans no longer readily available for small business customers, this proposal from Santander could provide some respite.
While there is little doubt that this grant will be well received by business owners, the Spanish bank faces competition from holding company CYBG who also seeks to invest it in one of their current accounts. It is important that small businesses know their financial stability doesn’t start and end with the banks.