Performance review and future developments

While we have made great progress over our first financial year of operation, we recognise there is still much more to do to ensure smaller businesses have access to the finance that enables them to fulfill their potential.

Our market impact has grown significantly over the last year – British Business programmes currently support over 40,000 smaller businesses with over £2.3bn of finance. In addition, we participate in £2.9bn of finance for small mid-caps. Our activity is forecast to increase significantly as we deliver our plan of supporting £10bn of finance over the next few years. 

Lending Solutions – a range of debt solutions to help businesses start-up, scale-up and stay ahead

Programmes included within this business area are the Start-Up Loans Programme, our new Help to Grow programme – where we are currently requesting proposals from delivery partners – and the Enterprise Finance Guarantee (EFG).

Recent highlights include the Start-Up Loans programme reaching the milestone of 25,000 new businesses supported in January 2015 and the announcement by the Prime Minister in February 2015 that the British Business Bank will pilot a new programme, under the banner Help to Grow, to support ambitious smaller businesses looking for Growth Finance.

In the Autumn Statement, December 2014, the Chancellor announced that EFG’s lending capacity had been increased, enabling its partners to guarantee up to £500m of new lending to smaller businesses in 2015-16.

Over the coming year we will be increasing our support for growth finance through the Help to Grow pilot. We published a Request for Proposals in March 2015 seeking participants to generate at least £100m of lending to growing businesses. This followed market engagement and extensive market analysis that indicated more firms are likely to seek finance for growth going forward. The Help to Grow pilot is a flexible instrument, with the British Business Bank having the ability to provide guarantees or funding to facilitate growth loans.

Our Lending Solutions are supporting £0.9bn of smaller businesses finance

 

Avalo2
Yvonne received a loan from the Start-Up Loans Company – supported by the British Business Bank – enabling her to start her business, Avalo Home

Venture Capital Solutions – helping businesses scale-up

Included within this business area are our interest and activities in the Business Angel Co-Fund, Venture Capital Catalyst Funds and the Enterprise Capital Funds (ECF) – all of which are focused on supporting a vibrant and diverse venture capital market to support early stage and high-growth firms in the UK.

Investments have been made during the year through Venture Capital programmes, with a focus on early stage companies with high-growth potential in the technology and business to business sectors.

The Venture Capital Catalyst Fund has made four commitments totalling £30m from a total allocation of funding of up to £125m and will continue to support funds that are near to reaching a first close but which might not otherwise meet their target.

We were also awarded an additional £400m of funding in the Autumn Statement 2014 to extend the ECF programme following market analysis into the equity-gap in the provision of smaller amounts of equity finance to SMEs due to asymmetric information between the investor and the business on likely viability and profitability.

Our Venture Capital solutions are supporting £0.9bn of smaller business finance

 

gousto

Gousto received two rounds of investment from the Angel CoFund – supported by the British Business Bank – and other investors

Wholesale Solutions – helping businesses stay ahead

Programmes included within this business area are ENABLE guarantees and ENABLE funding.

The ENABLE Guarantees programme aims to address capital constraints associated with SME lending by enabling participating banks to share a portion of the credit risk of a newly originated small business lending portfolio with HM Government in return for a fee. This will lead to a reduction in capital requirements connected to the guaranteed lending, allowing more lending to be generated from the same allocated capital base.

We have launched the first ENABLE Guarantee transaction, which will facilitate £125m of new lending through Clydesdale and Yorkshire Banks.

The ENABLE Funding programme is designed to improve the provision of asset and lease finance to smaller businesses, by ‘warehousing’ newly-originated asset finance receivables from different originators. Once this structure is big enough, we will seek to refinance a portion of our funding through securitisation in the capital markets, which will enable smaller finance providers to access institutional investors’ funds. Over the coming year the Bank will bring the programme fully on-stream.

Investment programmes – helping businesses stay ahead

Programmes included within this business area are the Business Finance Partnership and the Investment Programme. 

Our investment programmes have made the following commitments:

  • Business Finance Partnership Mid Cap – £863m total commitments
  • Business Finance Partnership Small Cap – £87m total commitments
  • Investment Programme – £400m of funding allocated, of which £228m has been committed to date.

The BFP was set up to improve credit access for SMEs and small mid-caps from sources other than established banks. It is delivered through two variants: BFP Mid Cap and BFP Small Cap. 

The BFP Mid Cap was announced in November 2011 to ease the flow of credit to small mid-cap businesses in response to the lack of liquidity caused by the global economic downturn. It made investments alongside private sector matched-funding into debt funds targeting mid-market companies with turnover up to £500m.  

The BFP Small Cap was launched in May 2012, with the aim of increasing the flow and diversity of finance available to smaller businesses with turnover up to £75m, by supporting the development of sustainable non-bank finance markets that are attractive to businesses and investors alike. It has supported a range of non-bank lenders, such as invoice finance platforms and asset-finance providers, making investments alongside private sector matched-funding.

Following the success of the BFP programmes, the Investment Programme was launched in April 2013, with a focus on making commercial investments, in a variety of forms, on terms and conditions that would be benchmarked to the private sector. The main aim of the Investment Programme is to promote volume and diversity of supply of lending to smaller businesses by encouraging new entrants and supporting the growth of smaller lenders in the market. To date it has invested in a number of debt funds, asset finance firms, marketplace lenders and invoice finance.

The Investment Programme has been further enhanced to include a new Expansion Capital initiative and a new Regional Finance initiative. The Expansion Capital initiative will enable investments either by way of long term equity or other forms of risk capital to support the growth of companies active in smaller business lending markets. We anticipate this will unlock further funding capacity for these types of finance providers. The Regional Finance initiative is designed to encourage the development of lending capacity outside South East England. Up to £50m is available through the Investment Programme to support regionally focused commercial business lenders. The scope of this initiative is designed to include both lenders operating in specific regions, and those who operate more widely but who operate one or more regional offices with a front office origination capability. 

Our Investment Programmes are supporting £0.5bn of smaller business finance and participate in £2.9bn of finance to small mid-caps

bramley

Gin and fruit liqueur manufacturer Bramley and Gage raised £25k through Funding Circle – supported by the British Business Bank’s BFP Small Cap – to purchase a new gin still to increase their production