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British Business Bank sets out case for more finance options for smaller businesses looking to grow

The British Business Bank, the UK’s national economic development bank, has today published The Benefits of Diverse Finance Markets for Smaller Businesses, a new report that provides a fresh analysis of the need for greater choice for the UK’s smaller businesses looking for finance to grow.

The report explains why and how the Bank works to help increase the number of providers and finance options available to smaller businesses across the UK.  That is important because there are regional imbalances in the availability and awareness of finance options amongst smaller businesses, which in turn affects the growth prospects of these businesses.  It examines the benefits of increased diversity of supply and heightened awareness of a diverse range of finance options, setting out what would be important to smaller businesses in such a market.

The report asks five central questions:

  • Who has access? Can smaller businesses unable to access mainstream finance options find appropriate alternatives?
  • Where can finance be accessed? Is the right kind of finance available in all regions, and are smaller businesses aware of their options?
  • When access can be arranged? Are smaller businesses able to access finance in a timely fashion?
  • On what terms is finance currently accessed? Is finance available that reflects the nature and constraints of running a small business?
  • How is access delivered? What are the obstacles posed by the particular way a smaller business applies, receives or pays for funding?

This new report demonstrates the progress that the British Business Bank has already made against its objective, set by Government, that over 75% of the Bank’s stock of finance is facilitated through providers other than the four largest banks. In the last financial year (2016-17), 94% of the finance the Bank supports was delivered by providers other than the ‘Big Four’ banks, a rise from 79% in the Bank’s first year of operation (2014-15).

Meeting that objective has meant that the Bank has invested substantially to back a more diverse finance market for the UK’s smaller businesses. Highlights of that activity since the Bank started operations in 2014 are found below across four areas[1]. Alongside these efforts, the Bank has taken action to raise awareness of the full range of finance options available to smaller businesses.  Businesses can find out more about their finance options by accessing the Business Finance Guide (www.thebusinessfinanceguide.co.uk/bbb), jointly published by the British Business Bank and the ICAEW and supported by 21 leading business organisations.

Asset and Asset Based Finance

Debt and Equity Funds

  • The Bank’s commercial arm, British Business Investments (BBI) has awarded £287m to 9 debt funds
  • So far, the Bank has invested in 24 Enterprise Capital Funds (ECFs) which combine private and public money to make equity investments in high growth businesses. The Bank’s investments have helped create an investment capacity of £938m
  • The Bank supports the Angel CoFund which makes equity investments of between £100,000 and £1 million in smaller businesses in the UK. So far, the Bank has helped provide £32m to 71 companies via the Angel CoFund

Challenger Banks

  • Through the Bank’s commercial arm (BBI) the Bank has provided £60m of structured capital to UK challenger banks
  • In January, the Bank announced that OakNorth would be the first challenger bank to partner with the Bank’s Help to Grow (H2G) programme. Help to Grow programme addresses the financing needs of smaller businesses which are struggling to raise sufficient senior debt to fund their growth opportunities
  • So far, the Bank has provided Enterprise Finance Guarantee (EFG) facilities to 7 Challenger banks helping to support viable smaller businesses struggling to access the finance they need to grow and succeed 

FinTech and Tech-enabled

  • The Bank has used its Investment Programme (operated by the BBI) to provide £135m to finance providers working with the FinTech or Tech-enabled sectors
  • The Bank’s VC Catalyst supports fund managers with a verifiable track record in supporting high-growth businesses and an ability to leverage in private sector investment to support the UK’s venture capital ecosystem. So far, the Bank has helped 8 FinTech companies access £30m via VC Catalyst
  • The Bank has launched a new variant of its ENABLE programme to support the FinTech and Tech-enabled finance sector

Keith Morgan, CEO of the British Business Bank said: “The diverse finance needs of our smaller business community are not always reflected in either the provision or take-up of available finance options, with pronounced differences seen across regions both in the supply and awareness of different finance options.

“As the UK’s national economic development bank, we were created to improve finance markets so they better serve smaller businesses across the UK, enabling them to fulfil their growth potential. We are committed to finding ways to support the market in increasing choice of both supplier and product as well as raising small business awareness of the range of finance options available.

“Today’s report sets out the benefits and importance of offering our smaller businesses a diverse finance market to support their growth and contribution to the wider economy. It again underlines the importance of ensuring smaller businesses are aware of and can access the right kind of finance they need to grow and succeed.”

ENDS

British Business Bank

For more information and smaller business case studies contact:

James Pignon, MHP Communications, +44 20 3128 8755, bbb@mhpc.com

Scott Shearer, British Business Bank, Scott.Shearer@british-business-bank.co.uk

Notes to Editors

About the British Business Bank

The British Business Bank is the UK’s national economic development bank.  Established in November 2014, its mission is to make finance markets for smaller businesses work more effectively, enabling those businesses to prosper, grow and build UK economic activity. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.

British Business Bank programmes support more than £3.4bn of finance to more than 59,000 smaller businesses and participate in a further £5.8bn finance to small mid-cap businesses (as at end March 2017).

As well as increasing both supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of the finance options available to smaller businesses. It has published the Business Finance Guide (in partnership with the ICAEW, and a further 21 business and finance organisations). This guide impartially sets out the range finance options available to businesses – from start-ups to SMEs and growing mid-sized companies.  Take the interactive journey at www.thebusinessfinanceguide.co.uk/bbb or download/print a copy or visit the Facebook page at www.facebook.com/TheBusinessFinanceGuide/.British Business Bank plc is a limited company registered in England and Wales, registration number 08616013, registered office at Foundry House, 3 Millsands, Sheffield, S3 8NH.

As the holding company of the group operating under the trading name of British Business Bank, it is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). The British Business Bank operates under its own brand name through a number of subsidiaries, one of which is authorised and regulated by the FCA.

More information, including a legal structure chart for British Business Bank plc and its subsidiaries, can be found on the British Business Bank website.

[1] All figures as of end of March 2017