Vince Cable launches business bank with £300m government investment
Government finance initiative set to boost SME growth
The Business Secretary Vince Cable has announced that £300 million will be co-invested alongside private sector investment in the first phase of the business bank programme. The scheme was first announced in last year's Autumn Statement and comes as long overdue good news about access to finance for small and medium-sized businesses (SMEs).
The cash injection is the first deployment of £1 billion of new capital allocated to the new initiative - and the business bank is looking to leverage at least the same amount in private sector investment. It is hoped that the initiative will encourage the growth of smaller lenders and see new entrants enter the finance market. Ultimately, SMEs will benefit because there will be greater diversity in the range of finance options available.
Dr Cable, who attended a Make It Cheaper event in Twickenham last September and talked about the need for businesses to look beyond the high street for funds for investment, claimed in his launch statement that access to finance remains the "number one problem" for SMEs. He continued:
"Through the business bank we are developing a range of measures to provide businesses with the power to choose the type of finance that suits them. [This] £300 million boost shows we are serious about increasing competition and diversity in the business lending market. Establishing a lasting business bank institution is a long-term project, but getting this money reaching SMEs as soon as possible is the first step."
The government will provide no more than half of any investment offered to an SME - and will do so on the exact same terms as the private sector investors. The programme will also be restricted to investments in UK businesses that have an annual turnover of less than £100 million. Authoritative research has found that SMEs have been disproportionately affected in their ability to access finance since the recession began in 2008 - and time will tell to what extent the new business bank levels the playing field.
The Department for Business, Innovation and Skills have published a guide to the Investment Programme and are organising a series of road shows to present it to prospective applicants, who can get further information and register their interest in attending these events by emailing email@example.com.