As the CEO of the British Business Bank, Keith Morgan is responsible for crucial business funding initiatives such as Start Up Loans and the Angel CoFund. As Business Advice found out, he has big plans for opening up the finance market.
Straight off the bat Morgan began by explaining that the British Business Bank (BBB), the brainchild of former business secretary Vince Cable, is there to fill some of the gaps that wouldn’t be plugged if the private sector was working by itself.
By working with the private sector, and other players in the market, he believes the BBB is able to create conditions meaning businesses will be more likely to secure the finance needed.
Such is the influence of Morgan and the BBB, we have included him in our maiden Small Business Decision Makers list – a definitive collection of people we think all micro and small business owners need to know about.
“If you see what has happened in the small business finance market during the last few years, first we went through a recession and then a recovery. Since then, there have been some important changes in availability of finance,” he added.
He pointed to developments such as the increase in bank finance as one particular area of interest, but still believes there are big issues to address.
“It is still the case that if you are a smaller business, or one without a track record – and particularly with big ambitious growth plans, then it’s difficult for that company to get the finance it wants. We see that in success rates when people go to the bank and ask for a loan.”
To assist businesses at different stages of the growth cycle, the BBB has broken itself down into three components: Start Up, Scale Up and Stay Ahead. Under each of these three banners lie different government funding schemes, from the Start Up Loan scheme at the beginning to debt funds later on.
The BBB is 100 per cent owned by the government, but independently managed by people like Morgan – born and bred private sector workers who have gained crucial experience of what roadblocks exist in the SME finance markets.
The Start Up Loans scheme is one of its most expansive, and typically offers loans of about £6,000 – but they do go up to £25,000. Morgan described it as a way of securing money that might have come from friends and family but would not have been offered by banks.
Once an aspiring entrepreneur has secured a loan, they pay a six per cent interest rate and get access to a business mentor to help them through the first stages of growing their company. To date, 35,000 loans have been granted through the scheme generating some inspiring success stories.
“The thing you have to realise about Start Up Loans is that not every one will be successful,” Morgan went on to say. “The loan is there to encourage people to take that extra initiative and a little bit of risk. But these loans, which do create companies, have seen some grow from a single-person organisation to those employing more than ten people.”
Part of what is interesting about the BBB is that as a business which takes on Start Up Loans capital grows, it then encounters new funding requirements. Rather than having to go to a new source, a business can once again tap up the BBB for an alternative.
While historical funding initiatives such as the Enterprise Finance Guarantee scheme, Regional Growth Fund and Angel CoFund have been relatively successful, a long-held argument has been that each are too disparate and don’t talk to each other.
Having been brought together under the BBB umbrella, businesses can talk to the same organisation – whether it is securing a small loan to get going or then lend against IP once it has has some momentum.
In the two years Morgan has been at the helm of the BBB, he has been a championing force in democratising the small and medium-sized company funding landscape. This has perhaps best been shown in the BBB’s Business Finance Guide, a 28-page document charting the SME finance options available from startup to growth.
So what will Morgan be getting his teeth into during 2016? He’s particularly keen to see what can happen from the recent HM Treasury legislation that means large banks will have to offer alternatives to small business leaders who don’t get what they aves asked for.
“The government is requiring that those banks refer details to what will be a range of finance referral platforms in the marketplace. We see them as an online brokering facility, where people’s interest in getting funding can be matched by SME finance providers,” he explained.
Another “significant initiative” he is working on involves the role the BBB can play in helping provide regional balance to the economy. While so many digital companies are found outside of South East England, Morgan finds it interesting that most capital flows into that region.
“One thing we announced in the Autumn Statement was the Northern Powerhouse Investment Fund, bringing together cities like Liverpool, Manchester and Leeds, as well as Local Enterprise Partnerships (LEPs) to collaborate with us and then £400m fund.
“It will offer both micro finance, loan finance and equity finance to smaller companies, and is a really important opportunity to provide additional support outside of what has been a focus in some areas of finance where the South East of England seems to benefit more.”
It’s clear to see that Morgan and the BBB have a big role to play in creating a democratic, easily-accessible and supportive SME finance ecosystem. Most business owners will at some stage require a form of external capital, whether it’s to simply help satisfy a big order or to acquire a new premise. Morgan and his team hope, in the future, there will only be one place you’ll need to go for any capital requirement – large or small.
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