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British Business Investments aims to invest in ‘at least one’ challenger bank over next 12 months

Tom Belger | 17:00 Wednesday 20th June 2018

British Business Investments Ltd has said it hopes to make another investment in at least one challenger bank over the next 12 months.

A recent freedom of information request by Specialist Banking found that British Business Investments had already invested in two specialist banks.

In October 2015, it announced that it had invested in Shawbrook Bank as part of a £75m capital raise. 

The commercial arm of the British Business Bank also reported the agreement of a £30m tier 2 capital facility to support the growth of Atom bank in June 2017.

“British Business Investments’ focus is very much on challenger banks (rather than big four), where its scale of investment can have a meaningful impact on the challenger bank,” said a spokesperson for the British Business Bank.

“British Business Investments would hope to make another investment in at least one challenger bank over the next 12 months, but that is dependent on market conditions and, in particular, whether insufficient, on-market funding is available from other investors (ie there is a gap).”

Other British Business Bank programmes provide guarantees to lenders to facilitate funding to SMEs, which without the guarantee would be unable to obtain funding.

Under the ENABLE Guarantee programme, three banks have been supported, including Clydesdale Bank back in March 2015, however, there is no current commitment with this bank.

More recently, United Trust Bank received ENABLE support in October 2017, while Cambridge & Counties Bank secured an ENABLE Guarantee in May this year.

“To date, all the British Business Bank’s ENABLE Guarantee transactions have been with non-big four lenders, and we expect the majority to continue to be with smaller banks,” the spokesperson added.

“We have several transactions in the pipeline and almost all are with smaller banks.”

Under the British Business Bank’s Help to Grow programme, it has supported both Lloyds Bank and OakNorth.

Through the programme, both are each able to lend up to £30m supported by a Help to Grow guarantee. 

In the 2017 Budget, it was announced that the Enterprise Finance Guarantee (EFG) programme – which has been in place since 2009 – would be extended for a further four years and expanded to support up to £500m per year.

To date, more than 28,300 loans have been drawn down under the programme and there are currently over 40 accredited lenders offering EFG-supported borrowing facilities to smaller businesses. 

“We have recently accredited a significant number of non-big four delivery partners for the Enterprise Finance Guarantee programme, and will be announcing more soon,” the spokesperson added.

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