Vince Cable has launched the first phase of lending by the New Business Bank by announcing an initial £300m injection of public funds into the project, which will be combined with private investment.
During the 2012 Autumn Statement, the Chancellor promised to plough £1bn into the new Bank over time, which will take the total pledged to SMEs by the Government across various initiatives up to the £4bn mark.
At the time, many commentators were surprised by the lack of information available about the proposed entity, and it would appear that the Department of BIS still has a very ‘open mind’ as to how the Bank will end up operating in practice.
The institution itself will not be formally ‘live’ until 2014, however the Government is seeking proposals from private sector financial services companies who want to be involved in distributing the Bank’s funds, including “smaller lenders, debt funds, asset backed lenders, supply chain finance, peer-to-peer lending and other lending platforms.”
Clearly, the Government is aware that it needs to urgently help many of the UK’s small companies at a time when they are starved of credit. Despite a lack of clarity about how funds will be distributed, the first applicants to benefit from this targeted SME lending could receive funds in the Autumn, according to the latest department news release.
Tellingly, The British Chambers of Commerce (BCC) said that the time it had taken to set up a SME Business Bank was ‘ridiculous’, and urged ministers to consider making available a much larger pool of investment. After all, £300m is a drop in the ocean in banking terms.
Main objectives of new Investment Programme
Managed by the Department of BIS, the Governments aims to invest funds in new and established channels that can:
increase the number of debt finance markets available to
SMEsmobilise new funding from private sector sources to support lending to SMEschannel finance to SMEs in an effective, appropriate and responsible mannerexpand the total amount and / or types of debt funding available to SMEsFuther Information
You can find out more about the Government’s ‘Investment Programme to encourage lending to SMEs’ on the GOV.UK website.
Tagged as: business bank, vince cable