First commitments from British Business Bank’s Investment Programme to unlock £125m for smaller businesses
*£30m invested through Praesidian Capital Europe *
*£15m invested through BMS Finance*
*70 Expressions of Interest received since launch of £300m Investment Programme*
The first commitments totalling £45 million have today been announced from the British Business Bank’s £300m Investment Programme.
£30 million of funding is to be committed to a Fund advised by Praesidian Capital, which is expanding its successful US SME lending model including the launch of a new fund with a dedicated office in London to provide senior and subordinated debt finance to smaller and medium sized UK businesses. At first close, the fund size will be approximately £96 million.
A further £15 million is to be committed to BMS Finance, an independent, specialist finance company, focused on lending to smaller and medium sized UK businesses with high growth potential and nearing profitability. At first close, the fund size will be £30million.
Both commitments are subject to agreement on final terms and legal completion, but it is expected that both funds will commence lending to smaller businesses in the first quarter of 2014. In due course, the size of both funds is expected to increase beyond the first close levels.
Business Secretary Vince Cable said:
“Today’s investments, the first from the Business Bank’s Investment Programme, are an important step in helping businesses access the finance they need but cannot obtain from banks. The £45 million of public money will not only leverage far more private sector funds, but it also sends a message to small business that the British Business Bank is a reality.
“Small and medium-sized businesses across the country are being held back from growing because of a lack of credit. The British Business Bank will help build a fairer economy by addressing some of the deep-seated issues in the market, and will unlock up to £10 billion for small and medium-sized businesses over the next five years.”
Ron Emerson, recently appointed Chair of the British Business Bank, said: “Today’s announcement clearly demonstrates how the British Business Bank addresses market weaknesses in the supply and diversity of finance for smaller businesses by using its resources as a catalyst to unlock finance for them.
“We are already supporting over £500 million of lending and investment to businesses across all our activities on an annualised basis, and we will continue to build on this momentum.”
Launched in April, the British Business Bank’s £300 million Investment Programme is designed to promote the diversity of supply of lending by encouraging new entrants and the growth of smaller lenders in the market. Investments will be made via new and existing lending channels on a commercial basis. 70 Expressions of Interest to participate in the Investment Programme have been received to date, and the programme remains open for potential participants.
The British Business Bank is being set up as a state-owned economic development bank. Its purpose is to support economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for smaller businesses in the UK. Since it was launched, including £1 billion of new resources announced in last December’s Autumn Statement, the British Business Bank programme has made good progress:
- Existing smaller business finance programmes have increased their new lending and investment by 58 per cent in the first half of 2013 compared to the same period in 2012
- On an annualised basis, over £500 million of new financing is now reaching smaller businesses as a result of British Business Bank programmes
- 8,000 businesses were supported in the year to June 2013
- In total, £1.3 billion of loans and investments are supported by the British Business Bank programme.
The appointment of a permanent CEO for the British Business Bank is expected before the end of this year.
Notes for Editors:
1) The British Business Bank will support economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for small and medium-sized businesses in the UK. The Business Bank is a key element of the Government’s Industrial Strategy, and its programme is already contributing to making the UK the best place in Europe to start, grow and finance a business.
2) The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. Once HM Government has received European Commission State aid clearance, which is expected in 2014, this programme will be transferred in its entirety to the British Business Bank plc, which will operate as a Government-owned financial institution.
3) The £300million Investment Programme is designed to promote the diversity of lending by encouraging new entrants in the market. It’s aim is to support the development of diverse debt finance markets available to smaller businesses and mobilising additional funding from the private sector.
4) The programme may invest in businesses that offer non-traditional channels of lending that may not be regulated by the Financial Conduct 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 investment decisions of any kind
5) The Investment Programme builds on the success of the Business Finance Partnership (BFP). The first round of the BFP saw private sector investment into non-bank lending match the government’s £55 million investment, taking the total investment to £110 million. The second round of the BFP saw private sector investment exceed the government investment of £30 million, resulting in a total investment of over £70 million. Successful BFP bidders in round one were peer-to-peer lenders Funding Circle and Zopa, innovative fund management company BOOST&Co, and specialist asset finance provider Credit Asset Management Ltd. Successful BFP bidders in round two were innovative online platform Market Invoice, supply chain finance platform URICA and mezzanine fund manager Beechbrook Capital.
6) Praesidian Capital is a U.S. fund manager that has previously been supported by the U.S. Small Business Administration. It is expanding its successful U.S. lending model to Europe with a new fund and dedicated office in London targeting senior and subordinated debt for smaller UK companies.
The new fund is expected to be lent to businesses with a turnover of up to £100 million.
7) BMS Finance Ltd is an independent, specialist finance company, focused on lending to smaller and medium sized UK businesses with high growth potential. The new fund will target businesses with a turnover of less than £25 million, with a limit of 10% for businesses with a turnover of between £25 million and £75 million.