British Business Bank boosts lending to SMEs

As the UK government is working to respond to small business concerns over late payments, policymakers are also tackling another SME issue: lending.

The head of the British Business Bank has announced plans to enact a new program by 2016 to facilitate traditional lenders and big banks in referring small businesses that have been rejected for a loan to alternative financing options.

The Bank also revealed this week that it is now inviting applicants interested in running an online platform that would connect these small businesses to alternative lenders.

While the Bank said it is looking to implement the scheme by next year, officials said they did not want to do so in haste.

“We will definitely want to have something in place by 2016,” said British Business Bank Managing Director Andrew Van Der Lehm. “The banks need to implement it and we need to get the systems right. It is better that the system is implemented well than we rush it.”

The British Business Bank has also announced that it is opening its ENABLE Guarantee programme to all banks that lend to smaller UK businesses following completion of its scheme’s first transaction.

The programme encourages participating banks to lend more to smaller businesses by reducing the capital they need to hold to support such lending.

The first transaction, with Clydesdale and Yorkshire Banks, will support £125m of new lending to smaller businesses – of which at least £50m will go to products and industry segments the bank have not previously covered.

Vince Cable, Secretary of State for Business, Innovation and Skills said: “I set up the British Business Bank to give small businesses access to alternative finance schemes that were badly needed. It is delivering and is supporting £1.8 billion of finance to over 43,000 smaller businesses.

“This new guarantee programme will make it easier for challenger banks to lend to small businesses and help to accelerate the transformation of UK banking into a more dynamic and competitive marketplace.”

Keith Morgan, CEO of the British Business Bank said: “Our ENABLE programme represents a significant scaling up of our firepower in making finance markets work better. The funding unlocked by the programme will make a real difference to smaller UK businesses.”