Finance · 17 March 2016

The Budget 2016: George Osborne backs small business lending market with 1bn pledge

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British Business Bank will support small business lending
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.



Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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