Speaking to the Institute of Directors, the Deputy Prime Minister outlined plans for the £1.2billion Business Finance Partnership (BFP). The BFP is part of the Government’s package of credit easing that also includes £20bn through the National Loan Guarantee Scheme.
The Government is currently considering proposals for the BFP, including allocating finance to senior loan funds. £100million has already been earmarked to support non-bank lending channels such as peer-to-peer lending and mezzanine finance.
BIS will distribute this £100million portion of the BFP. It aims to increase the supply of capital through non-bank lending channels. This should also stimulate the development of a deeper and more diversified non-bank lending market for those businesses in the UK with a turnover of less than £500m.
As announced at Budget, a request for proposals will be issued at the end of May to invite finance providers to bid for these £100m.
Deputy Prime Minister Nick Clegg said: We need to break open the market here in the UK, with more competition within the sector as well as more alternative sources of finance, outside of it.”
“The Coalition is going to invest directly in non-bank finance as part of our £1.2 billion Business Finance Partnership - £700 million will be invested through up to seven fund managers who will lend directly to British firms. There will be additional investment from the private sector with our share eventually returned to government.
“That still leaves half a billion, £100 million of which will be invested in banking alternatives for SMEs. And, if we see quick take-off, I will certainly want us to invest the remainder as quickly as we can.
“Investments will be made over the coming months, to precisely the kinds of schemes I’ve described and I’m issuing a call to all of you today - tell us your ideal way to bypass the banks to unlock new channels of capital.
Business Secretary Vince Cable said:
“We need to reshape the UK’s finance landscape to better serve the needs of ordinary businesses, helping more companies find the support they need to start and grow.”