Commercial Finance Specialists

Santander UK is joining several banks in offering initiatives to help small businesses secure credit.

Following Lloyds’ announcement last week that it would lend £12 billion to small- and medium enterprises, and the Royal Bank of Scotland’s decision to forego fees on loans for SMEs for one quarter, Santander UK is now set to unveil a £200 million ($314 million) commercial finance fund designed to support SMEs that are struggling to obtain credit.

 

Santander’s offering to the regional growth fund suggests that its sights on not firmly fixed on London either, and it has highlighted over 700 businesses in Scotland which could apply for its investment package.

The ‘Breakthrough’ fund will target companies with a turnover of over up to £10 million that wish to avoid sacrificing equity in their companies to private investors. It hopes to provide mezzanine funding – that is, a hybrid of loan capital and equity capital for flexibility – which is often difficult for SMEs to come across, especially where they already have existing borrowing in place.

Santander’s executive director of commercial business banking, Steve Pateman, commented on the scheme:

"Small and medium sized businesses are vital to the UK economy and it is crucial that they are able to access the finance they need to invest in their businesses to grow and create jobs and stimulate demand throughout the supply chain.

"We know that there is a recognised funding gap for companies with a turnover of under £10 million looking for growth capital, and we want to help fill that gap."

The Autumn Statement delivered this week suggested that further quantitative easing measures to be implemented by the Bank of England were likely to adopt an allocation system based on banks’ outward lending activity. It may be little surprise, then, that banks are seeking preferment by responding to the political challenge of offering greater credit support to Britain's small businesses.