By Richard Johnstone | 20 May 2013
Plans to create a government-backed business bank are part of moves to ‘shift’ lending to firms away from conventional financiers, Business Secretary Vince Cable said today.
Speaking as the CBI published a guide to different sources of funding for private companies, Cable said businesses needed alternatives to bank lending when looking for finance to expand.
He said the guide would help ‘raise awareness’ of the different options available. These include bond issues and investment from venture capitalists and private equity firms.
The British Business Bank will begin lending in the autumn. Cable announced its creation last September, saying it would be established with £1bn of government funding to boost lending to small- and medium-sized firms. The first phase of the programme was launched last month with a pledge to provide £300m in an initial round of loans.
Cable added: ‘The government wants to see a shift in the market structure towards non-bank lending, and through the business bank is deploying £300m of the £1bn allocated to the initiative to invest alongside the private sector in new entrants and the growth of smaller lenders.’
The CBI's Guide to alternative sources of finance found that, if medium-sized businesses were able to access capital, they could boost the economy by an additional £20bn by 2020.
UK banks are the source of almost 80% of all credit to growing businesses. However, the financial crisis has put the UK on an irreversible path to a ‘new normal’ in financing following regulatory reform, CBI policy director Katja Hall said.
‘The UK’s small- and medium-sized businesses are the backbone of our economy, so ensuring they can access the capital they need to grow and create jobs is critical,’ she added.
