The British Business Bank published its annual report today, with the news that it had increased the supply of finance to businesses, with an increase of 45% in the total stock of finance offered through the Bank’s programmes.
The BBB had four key objectives to hit as part of its mandate, and the report makes clear it has hit all four. The first, increasing the finance supply, shows that in 2015-14, the bank’s stock of finance was £5.1bn. That increased in the past year by 45%, up to £7.5bn.
The second objective was to diversify the channels that the bank’s finance supply travels through. Again, 2015-15 showed positive trend, with the amount of finance being distributed outside the Big Four banks increased from 79% to 90%.
It’s third target was to focus on ‘promoting better information in the market so smaller businesses better understand their finance options’ – the bank says awareness of different forms of funding has risen to 48% from 45% in 2014/15 – in part thanks to the publication of the recent Business Finance guide.
The final target was to deliver better return on its taxpayer-funded finance supply. Again the trend was positive, with return on capital employed jumping from the low figure of 1.3% to 2% in 2015-16.
‘Diversity of finance channels critical’
The BBB now supports over 48,000 SMEs, and much of the increase in its financial backing has been delivered via its ENABLE programmes, which added a £100m lease finance facility with Hitachi Capital and a £51m facility for LDF under the ENABLE Funding programme, following a £125m guarantee facility for Clydesdale and Yorkshire Banks towards the end of 2014–15.
According to the BBB, the diversity of finance channels matters as much as the amount, and it focuses in the report on the different ways small businesses can access finance, from guarantees provided by Enterprise Finance Guarantee scheme (which is set to be diversified further with an asset finance variant designed to re-open the programme’s lender accreditation process to increase the number and diversity of participating lenders, and enhancing our engagement with the advisor community to raise awareness of EFG amongst smaller businesses) to start up loans and venture capital delivered through the Angel co-Fund and Venture Capital Solutions.
‘Information still vital to helping SMEs access right finance’
Improving the levels of understanding among businesses about the options they have has been a major focus for the BBB in the past year. “We know from our research that around 60% of SMEs only contact one provider when looking for finance – generally their own bank – and around a third of these will cancel their plans if they receive a ‘no’,” the report says.
As a result it has partnered with the ICAEW and others to produce the Business Finance Guide, and has increased the amount of research it undertakes to understand what SMEs need. Noting this, chief executive Keith Morgan said “We’ve always said that we will adapt to market conditions, flexing our offering to best serve the needs of the UK’s smaller businesses. Our Small Business Finance Market report, published this February, indicated that business requirements were changing from working to growth capital.”
Heralding the report’s findings, Morgan went on, “During the year we have developed new finance initiatives that serve the needs of smaller businesses, supported the Government’s key priorities and delivered on our return target.
“As we enter a period of increased uncertainty, we will redouble our efforts to support key segments of the small business finance market, helping the UK’s smaller businesses realise their potential.”