New Business Finance Partnership funding

Access to affordable finance will continue to be a burning issue for small businesses in 2013. At the end of 2012, the Government announced a new £100 million fund to help small businesses, but with one difference – it will be distributed by alternative lenders, not banks. On 12 December 2012, the Business Secretary Vince Cable pledged £55 million of Government funding to peer-to-peer lenders and other finance suppliers through the Business Finance Partnership (BFP).

Funding from the private sector is expected to make the total available to lend to small businesses up to at least £100 million over the coming years. Four lenders have so far been chosen to distribute the funds available. Peer-to-peer lenders Funding Circle and Zopa will receive £20 million and £10 million respectively, while BOOST&Co, a fund management company investing in innovative small businesses will receive £20 million and Credit Asset Management Limited, which provides specialist financing SMEs, will receive £5 million to provide asset finance and loans. The allocation of the remaining £45 million is due to be announced early this year. It is hoped that a more diverse range of finance options, including non-bank lending will bring additional choice and greater competition to the lending market. Cable also suggested that this announcement of the support is a sign of things to come from the new ‘Business Bank', mooted for launch in 2014.

However, the announcement does come with a warning that business should be aware that providers of non-traditional lending may not be regulated by the Financial Services Authority or the Office of Fair Trading and may carry a higher degree of risk than other investments. Businesses and investors are advised to seek independent financial advice before making any decisions.

 

Introduction

Access to affordable finance will continue to be a burning issue for small businesses in 2013. At the end of 2012, the Government announced a new £100 million fund to help small businesses, but with one difference – it will be distributed by alternative lenders, not banks.