SMEs struggling to access finance have received a boost as the Business Secretary Vince Cable launched the first phase of the new business bank.
Some £300 million will be invested alongside private investors to address long-standing gaps in the SME finance market. This money is the first deployment from the £1 billion of new capital allocated to the business bank in the 2012 Autumn Statement. It will build on the success of the Business Finance Partnership to leverage at least the same amount in private sector investment.
The focus is on promoting greater diversity of debt finance available to SMEs by encouraging the growth of smaller lenders and new entrants in the market. Investments will be made via new and existing lending channels on a commercial basis.
New research by the National Institute of Economic and Social Research (NIESR) highlights that SMEs have been disproportionately affected in their ability to access finance as a result of the contraction in bank lending since 2008.
Business Secretary Vince Cable says SMEs are still saying that access to finance is their number one problem, preventing them from investing and growing: “That’s why through the business bank we are developing a range of measures to provide businesses with the power to choose the type of finance that suits them.”
The Government committed £1 billion of new capital to the business bank initiative last year, and, taken together with existing measures means the government is providing nearly £4 billion to help SMEs secure lending. Although the formal institution will not be operational until next year, the Government is determined to make support available to SMEs as soon as possible in advance of this.