Business Bank To Focus On Starts-Ups

Posted on 7th January 2014

According to the recently appointed Chairman of the Government-backed Business Bank, which will be fully operational by this autumn, the bank will focus on start-ups and early-stage companies that have difficulty raising finance from commercial banks and investors because they lack a record.

Ron Emerson has said that one of the bank’s objectives is to have an economic impact on company formation, employment and gross domestic product, which means looking for the growth companies.

The bank aims to address a long-term shortage of funding for small and medium-sized enterprises (SMEs), as well as filling a gap left by mainstream banks whose lending is constrained by tougher capital requirements.

It will focus on firms with a turnover of less than £25m, although it may help some with a turnover of up to £100m, depending on the individual cases. It will work by part-guaranteeing loans via existing and new banks and alternative providers, such as peer-to-peer lenders and co-fund investment by venture capital and business angel networks.

Although critics have said that the bank’s capital is too small for it to make a significant difference, Mr Emerson disagrees, saying that it will take a “very targeted approach” to unlocking £10bn of extra public and private finance for SMEs over the next five years.

Its current status is that it has £1.25bn of core funding from the Government on top of £2.9bn of capital from existing state schemes but Mr Emerson has said that it could eventually ask for more money, but not until it has shown results.

According to the Chairman, if economic growth is sustained, as predicted, now is “a great time” to be in the market helping small firms with growth potential.

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