The government has promised a further 1bn worth of commitments to support small businesses access the finance needed for growth.
Following George Osborne’s Budget announcement to the House of Commons on 16 March 2016, the government has outlined its support package for small businesses via the British Business Bank (BBB).
In the full Budget document published by the government, the chancellor confirmed a 1bn package, enabling the BBB to work in tandem with regional and local authorities to help invest in local small businesses.
From April 2016, the BBB will support the first loans under its Help to Grow programme, backing at least 200m of lending to fast-growing small firms. First announced by the prime minister last year, the Help to Grow programme will launch its first transaction in the coming months and, if successful, is expected to support fast-growth ventures seeking investment of between 500, 000 and 2m.
The state-owned development bank will also agree with local enterprise partnership organisations in the Midlands the terms for establishing a Midlands Engine Investment Fund, investing in local businesses in the region to the tune of 250m.
The BBB has agreed to extend its Enterprise Finance Guarantee programme, supporting firms with a poor track record or considerable collateral to access the finance needed for sustained growth, with the means to lend over 250m a year until at least 2018.
In January, Business Advice interviewed BBB CEO Keith Morgan, who revealed that the bank’s purpose was to plug some of the gaps created by a malfunctioning private sector.
Having been named one of our 30 Small Business Decision Makers for 2016, Morgan told us the extent to which the BBB is able to evolve the small business lending market so that it benefits companies. Morgan said: It is still the case that if you’re 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.
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, added Morgan.
The Budget also saw Osborne designate several finance platforms under the government’s finance platform regulations for SMEs following advice from the BBB. Bizfitech, Funding Options and Funding Xchange will from now on be regulated by the state as the government recognises the platforms? importance in matching smaller businesses that have been declined for finance by banks with alternative finance providers.
A progressive measure and a major reform to the small business lending market, the regulation of these platforms will coincide with the designation of certain high street banks and credit reference agencies (CRAs) that fall within the scope of SME credit data regulations. The government will ensure CRAs receive access to the credit information of small businesses from high street banks, providing all finance providers with equal access to the information.
Commenting on the new rules, credit agency Equifax’s UK & Ireland commercial head, Nic Beishon, said: The sharing of SME information amongst financial providers is an excellent initiative to increase competition in small business lending and improve SME access to competitive financing options.
Amongst these platforms, Funding Xchange is one that has proved particularly successful at linking startups in need of finance with the best debt provider out there. In November, KPMG announced that they would be partnering with the platform to allow its small business clients to compare personalised offers from a range of finance providers.
Backing Funding Xchange, KPMG small business accounting team partner Bivek Sharma told Business Advice: Businesses looking for money spend half their lives going round speaking to people. Spending six or seven weeks trying to get a loan, and then getting rejected, is a huge effort for no reward.
Lack of regulation in the UK small business finance market has so far been blamed for the lack of small firms? ability to achieve sustainable growth. Opaque tariff charges, hidden fees and an inability to compare the costs of financing options previously combined so that small firms were forced to pay more than they should.
Read on to find out why online alternative platforms are taking an increasing portion of the UK’s lending market to small businesses.