The Chancellor announced within his Budget 2013 statement that the Business Bank’s first business strategy would be released on 22 March.
It outlined an accelerated timetable for the deployment of £1 billion of new capital, improving access to finance for SME support schemes.
In a bid to develop a lasting new institution that will expand and diversify UK finance markets to serve SMEs by the end of 2014, the Business Bank will diversify and expand the supply of lending to small and mid-sized enterprises.
In addition, the Business Bank will manage £2.9bn worth of existing Government debt and equity schemes designed to ease access to finance.
Business secretary, Vince Cable believes unifying budgets and spending authorities is a positive step towards “providing a more coherent and comprehensive package of support for businesses”.
“Inadequate access to finance for small and medium-sized enterprises is one of the biggest risks to economic recovery. We need bold action to fix what has always been a weakness of the UK economy, and since the financial crisis [it] has become an urgent problem,” he added.
New investment schemes
A new £300 million investment scheme is expected to underpin these plans this spring, along with an additional £50 million for the Business Angel Co-investment Fund, providing support for start-ups and early stage companies.
The Business Bank will also invite proposals for investment in the following areas: equity, equity-like and debt instruments within financial institutions, debt funds or asset-backed lenders providing funds directly to businesses and; non-bank channels such as supply-chain finance and peer-to-peer lending schemes.
Mr Cable revealed that the first transactions under the new programme will hopefully begin by September, with the aim of being fully operational by the latter half of 2014.
As part of this new capital deployment, the Business Bank also announced it will provide £75 million of new funding for venture capital. Start-ups and early stage firms will be supported through an extension to the Enterprise Capital Fund programme and an expanded Business Angel Co-Investment Fund .
Making businesses more investable
Meanwhile, the extension of the Funding for Lending scheme and the Seed Enterprise Investment Scheme (SEIS), regarded by many investors as one of the most attractive investment schemes in the world, should achieve the government’s aim of making start-up technology businesses more attractive to invest in.
Additional funding has also been directed towards start up loans. As announced in January, £30 million will be given back to entrepreneurs and young professionals.
Growing businesses quietly confident in new proposals
Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), is hopeful that the timetable for the Business Bank’s delivery will benefit thousands of entrepreneurs and early stage companies.
“The BCC has been calling for a business bank since 2011, so we are pleased that progress to get it up and running is finally underway. Now that a firm timetable for its delivery is in place, businesses will begin to feel that the promised business bank is starting to get momentum,” he said.
“Although we are huge supporters of having our own business bank here in the UK, it has to address the long-term structural gaps in the business finance market for it to be a game changer.
“That means lending directly to growing companies that have previously failed to get the growth capital they need, and building a bank on a larger scale than the current proposals suggest.”
Easing the strain on lenders
The government will also investigate options for improving access to SME credit data to make it even easier for newer lenders to assess loans to smaller businesses.
SME efficiency also appears to be a top priority with the government securing a commitment from the payment card industry to reduce the time it takes for credit and debit card payments to reach SME bank accounts by up to three days; this will be achieved by adopting faster payments systems.
Image: The CBI