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British Business Bank Turns To SME Asset Financing

Two U.K. financial institutions have launched a new joint initiative to provide asset financing to their business customers. Reuters reports published Friday (Oct. 2) said state-run British Business Bank has reached a deal to provide finance firm Hitachi Capital with a $151 million credit facility aimed at providing small businesses with financing for equipment and other necessities.

[bctt tweet=”The British Business Bank will provide finance firm Hitachi Capital with a $151M SME credit facility.”]

The new facility is an effort among the U.K. government to boost the economy through small business finance, reports said. The British Business Bank was launched several years ago as lawmakers sought ways to fuel small business finance while mainstream banks shunned the demographic.

The British Business Bank said more similar facilities are on their way and that it plans to expand its financing services to lend up to about $450 million and then potentially sell those loans to other investors.

“We are planning a number of further transactions over the next 18 months and to refinance these facilities through securitization once they achieve the required critical mass,” said British Business Bank Managing Director of Wholesale Solutions Reinald de Monchy, according to reports.

The European Investment Fund will guarantee up to 50 percent of the small business loans issued through the facility, reports said.

Earlier this year the British Business Bank revealed plans to enact a late payments program that sees traditional banks referring small businesses to alternative lenders when they get rejected for a loan. Part of the program, which the bank wants to enact by next year, would be to work with companies that would operate an online platform for SMEs to find alternative financing.

Recent data on small business lending in the U.K. has provided a mixed picture, with some analysts pointing to a rise in traditional bank lending to SMEs and others highlighting a decline in lending or a decline in demand for SME loans.

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