Following on from our recent article on the new Business Bank, this is the second in a series explaining the various government funding schemes available to businesses in the UK.
Business Finance Partnership (BFP)
Background
It is a fact that 85% of all business loans are still handled by the “big four” banks as Barclays, HSBC, Lloyds and Royal Bank of Scotland dominate the business lending landscape in the UK.
However, that landscape is changing as more sources of alternative lending become available for SMEs.
Under the Business Finance Partnership (BFP) scheme, the Government has sought to increase the supply of capital to businesses through non-bank lending channels. The government is investing £1.2 billion in increasing lending to small and medium sized businesses from sources other than banks. This money is being matched with at least an equal amount from private sector investors and will be invested on fully commercial terms.
The Business Finance Partnership has 2 strands.
1. The first strand invests in fund managers who lend to medium sized businesses with turnover of up to £500 million. The first 5 funds have now been set up and together they manage £700 million of government investment alongside over £1 billion from private investors.
The 5 funds are:
- Alcentra: 020 7367 5003
- Ares: 020 7153 4631
- Hayfin: 020 7074 2906
- M&G: 020 7548 3156
- Pricoa: 020 7621 8429
Another three fund managers have been shortlisted to manage a further £400 million of government investment. Details of these investments will be confirmed later in 2013.
2. The second strand of the Business Finance Partnership invests in non-traditional lenders that provide an alternative source of lending for small businesses with turnover up to £75 million. Seven different lenders have received £85 million of government investment and will lend more than £240 million to small businesses by attracting matching private sector investment. Prospective small business borrowers should contact these lenders directly. The lenders are:
- Beechbrook Capital who provide mezzanine loans to small businesses
- BOOST&Co who provide larger loans to small businesses
- Credit Asset Management Ltd (CAML) provides leasing and professional loans
- Funding Circle is an online platform that allows small businesses to borrow directly from investors
- Market Invoice gives small businesses advances on invoices from corporate customers
- URICA is launching a new model of supply chain finance
- Zopa is an online platform that allows small businesses to borrow directly from investors
The Department for Business, Innovation and Skills’ objectives are to create the conditions for sustainable, shared and balanced growth. BIS says its focus is on four priorities:
- Securing an economy that is more dynamic and more balanced between public and private sectors and between regions;
- Safeguarding the UK’s long term growth by promoting skills and by turning knowledge to commercial use;
- Stimulating enterprise and trade to drive the rebalancing and private sector growth we want to see; and
- Removing government as an obstacle to growth while ensuring responsible corporate behaviour.
It is hoped that a more diverse range of finance options, including non-bank lending, will bring additional choice and greater competition to the lending market.
Vince Cable
Speaking at the Federation of Small Business, Business Secretary Vince Cable said of the current financial situation:
“A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment.”
Offering the lending solution, the business secretary added:
“We are taking a range of actions to support SMEs and shake up business finance markets, including through the new business bank.”
Finding alternative funding
If the continuing lack of availability of funding is affecting your business, please contact us. We are specialists in this field and can point you in the right direction.
As always, if you have any comments or any of your own experience you would like to share on this subject, please contact me at john.thompson@transcapital.co.uk or on 0845 689 8750.
Image by: bisgovuk