Business Finance Partnership Sees Alternative Lending Boost

Fact: 85% of all business loans are still handled by the "big four" banks as Barclays, HSBC, Lloyds and Royal Bank of Scotland dominate the business lending landscape in the UK.

However, that landscape is changing as more sources of alternative lending become available for SMEs.

Under the Business Finance Partnership (BFP) scheme the Government has sought to increase the supply of capital to businesses through non-bank lending channels.

At the end of last year four lenders were announced as part of the BFP scheme with Funding Circle, Zopa, BOOST&Co and Credit Asset Management Ltd being allocated £55 million worth of funds to distribute.

Now three more new lenders will be distributing an additional £30 million worth of Government funding through Market Invoice, URICA and Beechbrook Capital.

With each lender pledging to attract further funding from private sector sources, the credit pool available to these three new business lenders is expected to reach a total of £70 million.

Market Invoice has been awarded £5 million from the Department of Business, Innovation and Skills (BIS) and sells invoices to investor pools.

URICA is a supply chain finance platform launching over the next few months and has £10 million of Government money to distribute.

Beechbrook Capital is a mezzanine fund manager, providing subordinated debt and is to receive £17 million from BIS.

Speaking at the Federation of Small Business, Vince Cable, the Business secretary, said of the current financial situation:

“A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment.”

Offering the lending solution, the business secretary added:

“We are taking a range of actions to support SMEs and shake up business finance markets, including through the new business bank.”

“Today’s £30 million announcement is an important boost for non-traditional lenders with creative and innovative solutions. It will increase competition and create a more diverse and balanced market for business lending.”

With seven alternative lenders now onboard, the government is expecting its own financial input to attract further private sector funding, pushing the total pool for the Business Finance Programme to more than £240 million.

The Government’s new Business Bank is due to start operating in April as an interim organisation, becoming fully operational by the Autumn of 2014.

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