Business secretary Vince Cable has unveiled the first phase of the government’s new business bank, its latest initiative to encourage lending to SMEs.
The initial stage of the coalition’s business bank will see £300 million co-invested into small and medium-sized businesses (SMEs) alongside private sector commitments.
In March, Cable outlined plans to start operations in April, with the bank becoming fully operational in autumn 2014.
The £300 million is the first allocation from the £1 billion of new capital that has been allocated through the business bank, a sum first revealed during George Osborne’s 2012 Autumn Statement.
David Cameron’s government his hoping that the lending mechanism will extend what it has been doing with its Business Finance Partnership (BFP).
The first round of the BFP saw private sector investment into non-bank lending match the government’s £55 million investment, taking the total investment to £110 million.
A second time round, the BFP saw private sector investment exceed the government investment of £30 million, resulting in a total investment of over £70 million.
Successful bidders in round one were peer-to-peer lenders Funding Circle and Zopa, fund management company BOOST&Co, and asset finance provider Credit Asset Management.
More on the business bank:
- The government’s new business bank for SMEs
- New business bank will not aim to displace existing institutions
- Business bank could be eclipsed by pension funds for finance support
Cable’s new institution will bring together £1 billion of new government capital and £2.9 billion of existing capital which will work alongside private sector contributions.
‘Today’s £300 million boost shows we are serious about increasing competition and diversity in the business lending market,’ Cable comments.
‘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.’
John Antunes, director of SME & Channels at SAP UKI, comments, ‘In terms of awareness, it is great to see that the government is publicly hailing the important role of small and medium businesses in Britain’s economic recovery.
‘SME success isn’t completely dependent upon government initiatives, but having public backing and funding can often give start-ups and small businesses both the financial (and confidence) boost they really need.’
The application process for investors for the first stage is now open and will run until 28 February 2014. However the government is encouraging investors to submit an ‘expression of interest’ by 22 May 2013.