Santander are among the banks who have announced new funds aimed at helping small businesses obtain credit.
The new Breakthrough fund from Santander totals £200 million of available credit. It will be available to companies with an annual turnover of less than £10 million who are traditionally considered a worse risk than larger companies. The deal will also include additional benefits such as funding for internships, access to training and networking, and the ability to work
alongside companies which are already successful.
The fund is intended to prop up those companies which do not wish to chase private investors for help, allowing them to create jobs and grow without handing over a share of their business.
The Breakthrough fund is made up of two separate pots of money: £150 million will come from Santander’s own accounts, with the remaining £50 million being provided from the government as part of the Regional Growth Fund. The latter portion is designed specifically for businesses in less well-off areas of the UK, and will not be available to companies located in London and the surrounding counties.
Applicants to Santander’s Breakthrough fund will be available to Fast Growth companies; these companies will be required to demonstrate high growth in employment or annual turnover. Fast Growth companies have a significant impact on the economic health of the UK. Companies in this category currently hold a net worth of more than £9 billion and include many new British household names such as LoveFilm.
The investment comes one week after Lloyds announced it would make an additional £12 billion available for small business lending in 2012. The figure is an increase of £300 million on the projected amount. The Royal Bank of Scotland also announced that it will not charge small business owners any fees on loans which are taken out between now and February.
British banks have been under fire for not providing enough funding to British business. Critics of the banks also believe that lending rates are too expensive. Experts believe a lack of credit is causing the economy to stagnate, thwarting any chance of recovery. The British government responded by pledging to underwrite £40 billion of funding from banks in the coming year.
Santander’s UK commercial business manager Steve Pateman said the bank hoped the increased equity would fill a credit gap which has opened up, admitting that the bank may lose money due to the increased risk of lending to smaller businesses. He added: “We know from our own experience how challenging growing a business can be and that is why we are providing a comprehensive package of support to assist British business owners in the steps they are taking to invest in and grow their business.”
Earlier this week, Santander announced that it would purchase Rainbow, an organisation which runs approximately 300 UK branches of the Royal Bank of Scotland and handles some small business affairs, increasing their presence in the SME market. The deal is expected to go ahead at the end of 2012.
