The Coalition Government’s campaign for boosting finance for enterprise, the British Business Bank, begins operations this year and is set to target small companies with growth potential to provide necessary investment.
The bank, launched in October 2013, will be fully operational by autumn 2014, as soon as it receives European Union (EU) state aid approval.
Ron Emerson, chairman of the British Business Bank, confirmed its initial focus would be on start-up businesses and early-stage companies that are having issues raising finance from commercial banks and investors simply because they lack financial records.
"One of the objectives is to have an economic impact on company formation, employment and gross domestic product. Therefore you really have to look for the growth companies," said Emerson.
The Business Bank will focus on companies with turnover up to £25m, although it may also consider lending to those with up to £100m in turnover.
The bank will part-guarantee loans from existing and new banks and alternative providers such as peer-to-peer lenders, and co-fund investment from venture capital and business angel networks.
Although the Business Bank will not have a High Street presence and won’t fund companies directly, it is designed to work in partnership with other financial institutions to improve access to private capital.
At present the Business Bank has £1.25bn of core funding from the Government on top of £2.9bn of capital from existing state schemes to underpin its funding reserves.
Although critics believe the amount of money available to lend from the Business Bank is too small to make a significant difference, Mr Emerson reiterated the bank would maintain a "very targeted approach" to unlocking £10bn of additional public and private finance for SMEs over the next five years.
"If economic growth is sustained, this is a great time to be in the market helping this sector," added Emerson.
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