£100 million of SME funding open to alternative lenders

The Government has opened up £100 million in funding to alternative lenders wishing to invest in small businesses.

It is the second round of funding worth £500 million as part of the Government's Business Finance Partnership (BFP) scheme. The remaining £400 million in this round will be invested by the Treasury through managed funds that will lend directly to medium sized business.

The BFP aims to ease the flow of credit available to small businesses by widening the sources of finance available. It is hoped the scheme will encourage alternative co-investment, such as peer-to-peer lending and supply chain finance, and move away from the current reliance on hard-to-obtain bank finance.

Any businesses model operating in the UK with an average turnover below £75 million over three years can benefit from the scheme, in which the Government will invest a maximum of 50 per cent into any fund or channel.

Business secretary, Vince Cable, said: "It's important we make finance available to small businesses through alternative lending channels to help firms access the support they need to start and grow.

"The Business Finance Partnership will help to develop alternative channels in the mid-term so businesses have access to more diverse finance options, and help to reshape the UK's finance landscape to better serve the needs of ordinary businesses."

The BFP forms part of the Government's £21 billion pledge in last year's Autumn Statement to ease credit conditions for businesses, which includes the £20 billion National Loan Guarantee Scheme, and the £1 billion BFP.

The first round of bidding in January attracted 24 proposals from managed funds. This year's Budget also confirmed a shortlist of seven funds inline to potentially receive up to £700 million in investment through the BFP.

Commenting on the scheme, Chancellor George Osborne said that the Government was passing on Britain's 'creditworthiness' - including low interest rates -on to businesses.

Interested lenders should submit proposals to HM Treasury or to the Department for Business, Innovation and Skills (BIS).