The British Business Bank, the government-owned bank established to increase the supply of credit to SMEs, has agreed to provide a £51m facility to LDF, a non-bank finance provider, to fund a portfolio of newly originated small business asset finance receivables.
The transaction, which is 50% guaranteed by the European Investment Fund, is the second of the British Business Bank’s ‘ENABLE Funding’ programme, which aims to significantly increase the supply of leasing and asset finance to smaller businesses in the UK.
It follows a £100m facility provided to Hitachi Capital (UK) Limited in October 2015.
The ENABLE Funding programme, which has been developed as an aggregation vehicle, will allow LDF to expand substantially its provision of asset finance to smaller businesses.
“Access to finance, particularly for asset procurement, remains a critical barrier to success for many smaller businesses and making this more readily available is something that we are fully behind,” said Peter Alderson, managing director at LDF.
LDF already delivers significant support to the SME sector – providing over £40m of finance in January alone – and plans to further increase this presence.
“We believe that this facility will enable us to further grow that base,” Alderson added, “and also provide a higher level of support, to a significant proportion of that client base.”
In order to build the critical mass necessary to refinance the assets, the programme will be announcing similar agreements with other funders during 2016.
Facilities will range from around £25m to £150m, and the programme will aim to refinance the warehouse facilities when receivables total approximately £300m or more.
This refinancing will allow institutional investors access to a large and highly diversified pool of SME debt.
“This second transaction in the ENABLE Funding programme will further boost the availability of asset finance for businesses across the UK,” said Reinald de Monchy, managing director for wholesale solutions at the British Business Bank. “We now have provided two facilities totalling £151 million and we anticipate further transactions throughout 2016.
“Our intention remains for these facilities to be refinanced through the capital markets once we achieve a required critical mass of circa £300 million or more.”