The government-owned British Business Bank has stepped up its commitment to helping small firms access asset finance by announcing the provision of £51m wholesale funding to SME lender LDF.
The move follows a similar agreement made between the government development bank and Hitachi Capital in October 2015. Half of the money provided for lending will be guaranteed by the European Investment Fund.
Peter Alderson, the managing director of LDF, said: “We are delighted to be working with the British Business Bank on this exciting initiative. Access to finance, particularly for asset procurement, remains a critical barrier to success for many smaller businesses and making this more readily available is something that we are fully behind.”
Reinald de Monchy, managing director of wholesale solutions at the British Business Bank, said: “This second transaction in the ENABLE Funding programme will further boost the availability of asset finance for businesses across the UK. We are particularly pleased to be able to be working with LDF, which is a high-growth lender, to help it expand its funding programme, which has already supported so many businesses across the UK.
“We now have provided two facilities totalling £151m and we anticipate further transactions throughout 2016. Our intention remains for these facilities to be refinanced through the capital markets once we achieve a required critical mass of circa £300m or more.”
Recent research revealed that Britain’s small businesses are leading the way when it comes to asset-based finance, with some 15 per cent of UK business’ turnover in 2015 supported by such lending, compared with an average of ten per cent throughout Europe. The data, which was compiled by the Asset Based Finance Association (ABFA), also showed that small British firms secured more than £20bn of asset-based finance in 2015.
Some groups have raised concerns over the relative lack of regulation in the asset finance space compared to other types of funding. James Sherwin-Smith, CEO of Growth Street, warned: “Business lending is currently exempt from APR regulation, which enables some lenders to hide the true cost of this credit by advertising products using prices that either fail to include fees, or use rates for periods shorter than one year.
“Factoring providers typically quote charges as a low percentage over base rate; however, the fees found in the small print usually constitute the majority of the cost. The lack of price clarity available to SMEs means small firms are paying more than they should for commercial finance.”
The British Business Bank is set to announce further partnerships with lenders throughout 2016, with funding packages worth between £25m and £150m expected.
For more insight into the small business funding landscape, don’t miss our interview with British Business Bank CEO Keith Morgan.
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