Keith Morgan, CEO of the British Business Bank, discusses some of initiatives that the British Business Bank are working on to support growing businesses.
The British Business Bank has a clear mission: to change finance markets for smaller businesses so they work more effectively and dynamically. By doing so, we play our part in supporting wider efforts to increase the UK’s productivity and long-term growth. We recognise the fundamental importance of small businesses in the UK economy and, with the appropriate finance and support, the potential they have to raise Britain’s productivity and growth performance.
Working with over 80 finance partners, we aim to unlock finance for smaller businesses in three ways: by increasing existing sources of finance, by catalysing new channels of funding, and by improving smaller businesses’ understanding of their finance options. We help stimulate competition and increase the chances that businesses find the right finance for their particular stage of development.
Importantly, where we act is informed throughout by an in depth understanding of the finance markets, as well as a thorough analysis of how these businesses contribute to the UK economy. We have recently published two major pieces of research, The Small Business Finance Markets Report 2015/16 and the 2016 Equity Tracker – which focuses on analysing the flow of equity to small businesses.
We are pleased to see encouraging signs across a broad range of finance markets. As the recovery has continued and balance sheets have been strengthened, bank lending is gradually improving, with more firms getting the finance they asked for.
Asset finance has seen solid expansion over the past year, and equity deal flows are strong. In addition, as has been well documented, the UK’s peer-to-peer sector is growing rapidly, building on the UK’s leading position in the area of financial technology.
However, there are still gaps in the small business finance markets. According to the OECD, the UK is the world leader in new business creation, but when it comes to the number of scale-up businesses (a three year old business, with a turnover of more than £2m and over 10 employees), the UK is just 13th in the world. The Bank is focused on helping British businesses scale up and grow, and has a number of programmes in place to increase the supply of finance for growth.
Our new ENABLE funding product programme is focused on helping smaller asset finance providers expand their provision of finance to viable smaller businesses. We have already agreed a £100m facility with Hitachi Capital UK Ltd, as well as £51m facilities with LDF, a non bank lender, and Henry Howard Finance, a South Wales-based lender.
The Bank is also focused on increasing the provision of debt finance. Our new ‘Help to Grow’ programme was established following research identifying a clear funding gap, particularly for high-growth businesses seeking loans of up to £2m.
The initial phase of Help to Grow is expected to support around £200m of growth loans in its first two years. The first £30m tranche of lending supported by the programme will be available to growing businesses through Lloyds Banking Group.
In addition, British Business Bank Investments Ltd, the commercial arm of British Business Bank, has committed £71m to eight venture capital funds through its Venture Capital Catalyst Fund, including a recent investment in Frog Capital II, a major new European Growth Capital Fund.
Venture capital is essential for high-growth, ambitious companies, which typically need equity investment during the riskiest part of their growth phase. The Bank is proud to be increasing the supply of equity to some of Britain’s most exciting businesses.
Growing businesses also need to ensure they are aware of the range of finance options available to them. The Bank is committed to helping demystify the small business finance markets, and we have jointly published the Business Finance Guide, in partnership with the ICAEW. The guide sets out the full range of finance options for businesses from start-up to growth to listing on the stock exchange. This will be updated in the coming weeks to further support businesses to grow and thrive, and will be available at Icaew.com
The Bank is committed to helping the small businesses that are so important to the UK economy. We are an agile organisation, and we look for issues in the marketplace before working alongside the private sector to help solve the problems. For more information on the British Business Bank, and to keep up to date with our developments, visit our website at www.British-Business-Bank.co.uk.