The Business Secretary pledged £55 million of Government funding – through a scheme called the Business Finance Partnership – to peer to peer lenders and other finance suppliers.
Match-funding from the private sector is expected to lever in a minimum of £55 million, making at least £110 million available to lend to small businesses over the coming years.
The first four successful bidders for the Business Finance Partnership funds are:
· Funding Circle, which will receive £20 million. It is a peer-to-peer lender enabling British people to lend money directly to small businesses in the UK and offers a faster and more efficient way for businesses to borrow finance
· Zopa will receive £10 million to offer in loans through peer-to-peer lending. Through its website investors can lend directly to small businesses, offering a more efficient way of helping firms to access loans
· BOOST&Co, a new fund management company focused on lending to growing and innovative small businesses, will receive £20 million to set up a fund that will make loans between £1 million and £8 million to small businesses
· Credit Asset Management Limited, a subsidiary of City of London Group plc which provides specialist financing to the SME sector, will receive £5 million to provide asset finance and professions loans.
Business Secretary Vince Cable said:
“Small and medium sized businesses need access to a diverse range of finance options, including non-bank lending. These new forms of finance are still small in scale today but they should, over time, bring additional choice and greater competition to the lending market.
“Today’s funding announcement is just the type of help that the new Business Bank will offer. The bank, which will be operational by 2014, is being designed to tackle these long-standing, structural gaps in the supply of finance for SMEs.”
The Business Finance Partnership is a £100 million fund. The Government expects to announce the allocation of the remaining £45 million in the New Year once due diligence is completed on the remaining bids still being considered.
The Business Secretary, who was speaking at the Association of British Insurers’ Investment Conference, also announced that a network of 1,000 Business Finance Advisors is to be launched to help small businesses identify the best type of finance to support their needs.
Notes to editors
1. The Business Finance Partnership (BFP) aims to ease the flow of credit to businesses in the UK by helping to diversify the sources of finance available to them. It is part of a larger programme of credit easing measures announced in the Autumn Statement 2011 to support smaller and mid-sized businesses that do not have ready access to capital markets.
2. A total of £1.2 billion worth of funding has been made available, with £100m allocated to the Small Business Tranche of the BFP. The remaining £1.1bn is targeting all sizes of businesses, and being allocated by HM Treasury.
3. The Government has already announced that it will invest £600 million alongside an initial £650 million from the private sector to create four new funds that will lend to mid-sized companies. These funds are now open for business and will greatly expand the market for such lending in the UK. The fund managers are Alcentra Limited, Haymarket Financial, M&G Investment Management and Pricoa Capital. An additional £100m is expected to be invested with a fifth fund manager shortly. [http://www.hm-treasury.gov.uk/bfp.htm]
4. Competition for funding under the Small Business Tranche of the Business Finance Partnership was launched on 31 May 2012 and closed on 4 July 2012. This first tranche of investment is subject to legal and commercial terms being finalised with applicants and parliamentary approval being given.
5. Businesses that offer non-traditional channels of lending may not be regulated by the Financial Services Authority or the Office of Fair Trading and may carry a higher degree of risk than other investments. By making these investments the Government is in no way endorsing or guaranteeing any particular channel, platform or investment, and investors should not, therefore, in any way treat the Government’s involvement in an investment as an indication of the investment’s soundness. Private investors, in particular, should consider seeking independent financial advice before making investments decisions of any kind.
6. Any businesses wishing to find out more information about the lending Funding Circle, Zopa, BOOST&CO and Credit Asset Management Ltd, should contact the organisations directly.
7. Funding Circle is an online marketplace enabling savers and investors to side-step banks and lend directly to small businesses. Set-up in August 2010 Funding Circle has helped businesses borrow over £60million. Each loan is comprised of small amounts of borrowing from many different people who compete to lend to the business in question, this enables the business to borrow at a better rate. With no bank in the middle both investors and borrowers achieve a much better deal with investors receiving an average 9.1 per cent yield on their money. www.fundingcircle.com
8. Zopa is the peer to peer online platform that brings together people who are good with their money, to reward them with better rates on their borrowing and saving. Responsible, creditworthy borrowers get access to loans cheaper than banks offer, with no additional fees for paying some or all the loan off early. By lending to these people, savers get inflation-beating returns far higher than paid by banks’ savings accounts. Zopa has now arranged more than £250 million in peer-to-peer loans in the UK, all at rates that borrowers and lenders have effectively agreed between themselves. Zopa now accounts for around two per cent of all personal loans issued in the UK each month. Zopa can be found at www.zopa.com.
9. BOOST&Co has been providing debt solutions to growing and innovative small business throughout Europe since 2011. It is management-owned and funded today by some of Europe’s largest private equity investors and family offices. It has offices in London, Paris and Berlin. The Business Finance Partnership funds will allow BOOST to provide loans to the UK small businesses at scale. More information at www.boostandco.com
10. Credit Asset Management Ltd (CAML) is a subsidiary of City of London Group plc which uses a traditional merchant banking model across its business platforms to provide specialist financing to the SME sector. Credit Asset Management Limited provides leasing and professions loans. CAML also enables institutional investors to secure efficient exposure to the SME sector. www.craml.co.uk/
11. The Business Finance Advisors, who are already accredited accountants and are familiar with business finance options, will offer advice on alternative sources to finance such as peer to peer lending and asset finance, applying for loans and overdrafts, and other issues such as business planning and managing accounts.
12. A directory of the Business Finance Advisors will be launched in the New Year.
13. The Government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries'. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
- To create the most competitive tax system in the G20
- To make the UK the best place in Europe to start, finance and grow a business
- To encourage investment and exports as a route to a more balanced economy
- To create a more educated workforce that is the most flexible in Europe.
Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.
14. BIS's online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.