British Business Bank rolls out ENABLE Guarantees programme to boost small business

Press release 26 March 2015

The British Business Bank is opening its ENABLE Guarantee programme to all banks that lend to smaller UK businesses following completion of its first ENABLE Guarantee transaction.

The ENABLE Guarantees programme encourages participating banks to lend more to smaller businesses by reducing the capital they need to hold to support such lending.

The first transaction, with Clydesdale and Yorkshire Banks, will support £125m of new lending to smaller businesses – of which at least £50m will go to products and industry segments the bank have not previously covered.

These areas include: Cash Flow Lending specifically for SMEs, Automotive Tooling Finance, creating an Emerging Technology Lending Unit and introducing a new Renewables Finance offering. The remainder will enable additional lending in areas where Clydesdale and Yorkshire Banks are already active.

I set up the British Business Bank to give small businesses access to alternative finance schemes that were badly needed. It is delivering and is supporting £1.8 billion of finance to over 43,000 smaller businesses. This new guarantee programme will make it easier for challenger banks to lend to small businesses and help to accelerate the transformation of UK banking into a more dynamic and competitive marketplace. Vince Cable Secretary of State for Business, Innovation and Skills
Our ENABLE programme represents a significant scaling up of our firepower in making finance markets work better. The funding unlocked by the programme will make a real difference to smaller UK businesses. We welcome the additional lending and choice of products that Clydesdale and Yorkshire Banks will bring to the market under this first transaction. Keith Morgan CEO of the British Business Bank
SMEs play a crucial role in a successful economy and we’re delighted to be joining forces with the British Business Bank to help more business owners achieve their growth aspirations. This new partnership will help us increase our support for SMEs and further expand our existing challenger presence in the SME market. Clydesdale and Yorkshire Banks have a long history of assisting SMEs through our full service offering. Our size and structure allows us to provide businesses with a very flexible and responsive approach to banking which we’re demonstrating with the launch of this new initiative. Paul Shephard Director, Business and Private Banking at Clydesdale and Yorkshire Banks

This comes shortly after the British Business Bank published a Request for Proposals for another of its programmes – a ‘Help to Grow’ Growth Loans pilot alongside Budget. ‘Help to Grow’ Growth Loans address the financing needs of smaller businesses which are struggling to raise sufficient senior debt to fund major growth plans.

British Business Bank is also issuing a performance update today, outlining recent progress on delivery of its programmes.

Further Information

Notes to editors

About ENABLE Guarantees

ENABLE Guarantees aim to stimulate more lending to small businesses by addressing the high capital consumption required by such lending.

Under the terms of the transaction, the Secretary of State for Business, Innovation and Skills provides Clydesdale Bank with a guarantee in return for a fee. The guarantee will only apply if losses on the guaranteed portfolio are higher than those typical for this type of lending. In this eventuality, the guarantee covers 75% of the ‘net credit losses’ in excess of portfolio income, once first loss retention has been depleted.

The ENABLE Guarantee significantly reduces the amount of capital the lender will need to allocate against the portfolio, enabling greater volume of lending to businesses.

The selection of Clydesdale and Yorkshire Banks follows a competitive process resulting from a call for proposals last year, focusing on the following areas:

  • Smaller SMEs
  • SMEs with a trading history of less than 5 years
  • SME growth companies.

In addition, the call sought applicants who could demonstrate they would use the guarantee for a net increase in the bank’s general lending to small businesses. Clydesdale Bank and Yorkshire Bank’s proposal best fulfilled these criteria.

About the British Business Bank

The British Business Bank makes finance markets for smaller businesses work better, enabling the sector to prosper, grow and build economic activity.

Its objectives are to:

  • increase the supply of finance available to smaller businesses where markets don’t work well.
  • create a more diverse and vibrant finance market for smaller businesses, with a greater choice of options and providers.
  • build confidence in the market by increasing smaller businesses’ understanding of the options available to them.
  • achieve this whilst managing taxpayer resources efficiently and within a robust risk management framework.

British Business Bank plc is a public limited company registered in England and Wales registration number 08616013, registered office at Foundry House, 3 Millsands, Sheffield, S3 8NH.

As the holding company of the group operating under the trading name of British Business Bank, it is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA).

British Business Bank operates under its own brand name through a number of subsidiaries, one of which is authorised and regulated by the FCA.

British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.

A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at legal structure

The attached document gives an update on the British Business Bank’s performance over the last few months.

About Clydesdale and Yorkshire Banks

Clydesdale Bank was established in 1838 in Glasgow and, as one of Scotland’s largest banks, has a proud history of innovation and support for industry and communities across the UK. Yorkshire Bank, which has a strong personal customer base and an extensive business capability in the North of England and the Midlands, was founded in 1859 in Halifax, West Yorkshire. Clydesdale and Yorkshire Banks are members of the National Australia Bank Group.

About ‘Help to Grow’ Growth Loans

The British Business Bank is running a pilot initiative to support ambitious, smaller businesses looking for Growth Finance.

The Bank issued a Request for Proposals (RfP) alongside Budget, seeking innovative and workable proposals from lenders looking to provide sophisticated debt finance between £0.5m and £2m – a market gap identified by recent British Business Bank research

While ‘mezzanine’ and growth finance markets work well at higher values, the research has identified barriers to entry for providers at lower values. The purpose of the pilot is to explore potential solutions to this challenge.

The Prime Minister announced the ‘Help to Grow’ initiative in 10 February 2015. Growth Loans are part of that package of support and are targeted at a proven market failure in access to finance.