Non-bank providers of finance will be able to grab a share of the £100 million Small Business Tranche of the Business Finance Partnership after the opening of an application process.
Initiated by the Department for Business, Innovation and Skills (BIS), the £100 million represents a slice of the £1.2 billion freed up as part of the Partnership.
It is hoped that the funding will allow non-traditional channels, including peer-to-peer platforms and mezzanine finance providers, to ease the flow of credit to small and medium-sized enterprises (SMEs) in the UK with turnovers below £75 million.
As part of the scheme, the BIS will invest up to a maximum of 50 per cent in any fund or channel, on fully commercial terms, providing the end recipient of the financing fits the criteria.
The government will come in on the same terms as private sector investors, getting the same rate of return. Any money from the government has to be matched by an equal amount from the prospective alternative funders, with capital to begin being allocated in the Autumn.
The Business Finance Partnership was initially unveiled by chancellor George Osborne as part of the coalition government’s Autumn Statement. It is part of a £21 billion programme of credit easing which the government hopes will support SMEs which do not have ‘ready access to capital markets’.
Anil Stocker, co-founder of peer-to-peer lending platform MarketInvoice, has had meetings with secretary of state for business, innovation and skills Vince Cable and will now be applying for two lots of £15 million. The first will to support its invoice finance auction product and the other is aimed at its supply chain finance platform.
Stocker says, ‘The government is absolutely right to be investing directly into small and mid-sized firms, to get the economy moving.
‘We’ve always said the biggest barrier to alternative finance is awareness, so the government standing behind the non-bank lenders shows we mean business and we can reset the funding landscape.’
To date, Stocker and MarketInvoice has provided £17 million to businesses across the UK.
Cable comments, ‘It is important we make finance available to small businesses through alternative lending channels to help firms access the support they need to start to grow.’
Proposals for a share of the £100 million will be taken until 20 July, with applications being for a maximum amount of £20 million.
