By Richard Johnstone | 10 April 2013
The first phase of the government-backed British Business Bank has been launched with a pledge to provide £300m of support to small- and medium-sized firms in the first round of investments.
The first phase of the government-backed British Business Bank has been launched with a pledge to provide £300m of support to small- and medium-sized firms in the first round of investments.
Announcing the funding today, Business Secretary Vince Cable said the bank would give businesses ‘the power to choose the type of finance that suits them’ to help them grow.
The £300m is the first tranche of investment from £1bn allocated to the plan by Chancellor George Osborne in the 2012 Autumn Statement.
Although the bank, which was first announced last September, will not be formally operational until next year, Cable said the government was determined to make support available as soon as possible. It is expected the first deal will be reached this autumn, with businesses encouraged to submit expressions of interest for investment by May 22 to be part of the first round.
The launch comes after the National Institute of Economic and Social Research found that SMEs had been disproportionately affected in their ability to access finance as a result of the contraction in bank lending since 2008.
Cable said the bank would help address this, as well as long-standing gaps in the SME finance market. It showed ministers were ‘serious about increasing competition and diversity in the business lending market’.
He added: ‘Small- and medium-sized businesses are still telling me that access to finance is their number one problem, preventing them from investing and growing.
‘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 bank will be able to back companies by both making loans and investing in an individual firm’s equity or debt. Public money will make up no more than 50% of the total investment, the Department for Business, Innovation & Skills said, with private sector investors being sought to match the available state funding.
The CBI business lobby said the launch of the business bank ‘demonstrates the government's commitment to supporting the financing needs of smaller and medium-sized businesses, which will help them to grow’.
Principal policy adviser for enterprise Hayley Conboy added: ‘It will broaden the funding options available to growing firms by boosting the alternative finance provider market. The key to the success of this and other government finance schemes will be to raise business awareness of the initiatives available.’
