Small and medium sized businesses (SMEs)
struggling to access finance received a boost today as the Business
Secretary Vince Cable launched the first phase of the new business bank.
£300 million will be invested alongside private investors to address long-standing gaps in the SME
finance market. This money is the first deployment from the £1 billion
of new capital allocated to the business bank in the 2012 Autumn
Statement. It will build on the success of the Business Finance
Partnership to leverage at least the same amount in private sector
The focus is on promoting greater diversity of debt finance available to SMEs
by encouraging the growth of smaller lenders and new entrants in the
market. Investments will be made via new and existing lending channels
on a commercial basis.
New research by the National Institute of Economic and Social Research (NIESR) highlights that SMEs
have been disproportionately affected in their ability to access
finance as a result of the contraction in bank lending since 2008.
Business Secretary Vince Cable said:
Small and medium sized businesses are still
telling me that access to finance is their number one problem,
preventing them from investing and growing. That’s why through the
business bank we are developing a range of measures to provide
businesses with the power to choose the type of finance that suits them.
Today’s £300 million boost shows we are serious
about increasing competition and diversity in the business lending
market. Establishing a lasting business bank institution is a long-term
project, but getting this money reaching SMEs as soon as possible is the first step.
The government committed £1 billion of new capital to the business
bank initiative last year, and, taken together with existing measures
means the government is providing nearly £4 billion to help SMEs
secure lending. Although the formal institution will not be operational
until next year, the government is determined to make support available
to small and medium sized businesses as soon as possible in advance of
The government welcomes proposals from a wide range of lenders. There
are opportunities for government to invest, alongside private
investors, in a range of options including existing and new lending
channels like smaller lenders, debt funds, asset backed lenders, supply
chain finance, peer-to-peer lending and other lending platforms.
Lenders should demonstrate how government could make commercial
investments through managed investments or direct capital investments.
It is expected that the first transactions will take place by Autumn
Applicants wishing to submit proposals can find more information of the application process, together with guidance, on the gov.uk website.
The application process is open until midday on 28 February 2014,
however applicants are encouraged to submit an expression of interest
before midday on 22 May 2013.