Business leaders welcome Cable’s £300m Business Bank

BUSINESS leaders in the West Midlands have welcomed the Government’s latest attempts to inject funding into the vital SME sector.

Business Secretary Vince Cable has pledged £300m to the sector following the launch of the new business bank initiative.

The money is being invested alongside private investors to address long-standing gaps in the SME finance market. The money is the first deployment from the £1bn of new capital allocated to the business bank in the 2012 Autumn Statement.

The Government said it would build on the Business Finance Partnership in order 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.

Mr Cable said: “SMEs are still telling me 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.”

He said the new pledge showed the sector it was serious about increasing competition and diversity in the business lending market.

“Establishing a lasting business bank institution is a long-term project, but getting this money reaching SMEs as soon as possible is the first step,” he added.

It is expected that the first transactions will take place this autumn.

Steve Brittan, president of Birmingham Chamber of Commerce, said access to affordable finance remained an issue of real concern to businesses in the area.

“There are gaps in affordable finance for SMEs especially those operating in the creative and high tech sectors. And if the business bank is to be a true game-changer, we need to see the pace and scale of investment funds increased considerably,” he said.

“We need a real emphasis on assisting viable businesses, which would not be served by traditional banking and business angel options, to grow.”

He said the chamber would be keeping a close eye on the impact of the business bank to ensure it genuinely added value to SME financing.

Ian O’Donnell, Warwickshire & Coventry Policy Chairman, Federation of Small Businesses, said: “It is good news that the Business Bank wants to get finance out quickly to the businesses that need it. The FSB has long called for more competition in the sector to promote choice and innovation so we welcome the diversity that this institution will create. We would urge alternative finance providers to make an application for the funding.”

Hayley Conboy, CBI Principal Policy Adviser for Enterprise, said the fund demonstrated the Government’s commitment to supporting the financing needs of smaller and medium-sized businesses, which would help them to grow.

“It will broaden the funding options available to growing firms by boosting the alternative finance provider market. The key to the success of this and other Government finance schemes will be to raise business awareness of the initiatives available,” he said.