By Marcus Leach
The government will, on Thursday, launch the Business Growth Fund (BGF), aimed at helping growing businesses with a turnover of between £10 million to £100 million.
The BGF will invest between £2 million and £10 million per business in return for a minimum 10 per cent equity stake and a seat on the board.
The BGF is backed by five of the UK's main banking groups - Barclays, HSBC, Lloyds, RBS, and Standard Chartered - working in collaboration with the British Bankers' Association. It is one of the key measures recommended by the Business Finance Taskforce, chaired by the former CEO of Barclays, John Varley.
“It is encouraging to see that banks are working with the Government to support mid-caps and large SMEs," Peter Ewen, MD of Venture Finance and Chairman of the International Factors Group said.
"Bank bashing has reached fever-pitch in recent months but it’s clearly time to move beyond this. Yes, many businesses are in dire financial straits post-recession, but to lay all the blame at the feet of banks is over-simplifying things.
“As well as hurting balance sheets, the last few years have also damaged business confidence, creating a ‘siege mindset’ discouraging many from even seeking out finance. The government needs to change this if it wants to meet its growth targets, so the BFG is a move in the right direction. The next step should be more education about the full menu of finance from those in power.
“The business finance landscape is fundamentally changed, and companies need to have a better understanding of their other options for funding growth and how to cope with life beyond the quick-fix credit of the past. Only by regaining financial confidence through education, will businesses be able to grow confidently and become the ‘recovery engine’ the UK so desperately needs.
“The BGF provides long-term equity-based funding and an active partnership with the lender, which is necessary for sustainable growth. Non-traditional forms of lending such as invoice and asset based finance — where funds are raised against real orders — is another sustainable option. Both provide a healthy balance against the easy debt-based lending of pre-2008.”