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British Business Bank: enabling regional prosperity

Source: PSE Feb/March 2019

With bank loans becoming harder to obtain for some small businesses, what are the options available for SMEs seeking financial support? Grant Peggie, director of venture capital solutions at the British Business Bank (BBB), comments on how it can aid growth within small businesses, and how this can impact regional economic prosperity.

In recent years, a growing number of alternative finance solutions have become more established and accessible for smaller businesses across the UK, acting as viable alternatives to bank loans.

Helping to create a more diverse finance market is a key objective of the BBB. This increasing diversity of funding options means that smaller businesses now have more choice when considering their finance routes. 

Providing finance to small and medium sized companies, which represent around 99% of businesses within the UK, is as important as ever. These businesses are the pillar of the economy: they go a long way in driving growth, opening new markets, and creating jobs throughout the country. It is therefore vital that small businesses are not discouraged by rejection from a bank and consider the alternative forms of finance available.

For smaller businesses, finance options may be required to maintain a steady flow of growth capital, accept new business requests, fulfil orders, or invest in necessary materials and assets – which in turn lead to expansion opportunities. Similarly, in larger businesses, external funding is also a valuable tool to support existing product lines, increase staff numbers, and perhaps move into new markets both here in the UK and globally.

One option, equity finance, enables companies to raise capital through the sales of shares in an enterprise and offers an experienced lender who can help to support the organisation, alongside the funding itself. Meanwhile, asset-based lending can also improve the liquidity of a business as it can be obtained quickly as the underwriting process is faster than with a traditional loan.

Likewise, invoice finance is a viable option as it can be secured against existing resources and is not based on historic financial performance; while peer-to-peer lending platforms, such as Funding Circle (in which BBB recently committed an additional £150m) helps provide choice and competition.

The need for an alternative lending option to bank funding has been addressed by the government in recent years. In 2017, the BBB launched the Northern Powerhouse Investment Fund (NPIF) to support businesses across the northern regions. NPIF aims to help the cities and towns within the north to increase their strength and provide a real, measurable contribution to the economy as a whole and reduce the historic regional disparities between the north of England, London and the south east.

Further across the country, the BBB is also working alongside local enterprise partnerships (LEPs) in the Midlands to deliver the Midlands Engine Investment Fund, and the Cornwall & Isles of Scilly LEP for the region's investment fund. These funds, which are dedicated to reversing the UK’s regional imbalances in smaller business finance, are working across the UK to boost each region’s economy and support the growth ambitions of the smaller businesses within each area.

This approach has highlighted the strength and innovation of businesses from across the UK. In November 2018, Rose Scaffolding Limited, an Oldham-based scaffolding business, secured a £250k loan from NPIF, which was used to invest in high-quality kit and training through quality apprenticeships to create opportunities for young people. With the support of NPIF, the company aims to increase its 25 staff to 40 by the end of next year, including six more apprentices. This growth in staff, as well as investment in new kit, has put the business on track to treble their company turnover.

Alternative finance solutions, including platforms, can go a long way in boosting regional economic prosperity in the future. SMEs have more choice from the various options at their disposal, but need to ask for advice to select the one best placed to support their growth ambition. 

The NPIF project is supported financially by the European Union using funding from the European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.


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