New £150m funding programme to support small businesses struggling to access finance
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Posted: Wed 27th Nov 2024
The British Business Bank has launched a new scheme aimed at helping social impact lenders to provide £150m over the next two years to small businesses that would otherwise struggle to access finance.
The Community ENABLE Funding (CEF) programme is aimed primarily at community development financial institutions (CDFIs), which provide debt finance to underserved smaller firms that can find it difficult to source money from mainstream lenders.
Social impact lenders are particularly important for small businesses set up by underrepresented groups, such as females or people from an ethnic minority group.
In 2023, 24% of loans from the sector went to ethnic minority-led businesses, which make up just 6% of the UK's small firms, while 41% went to female entrepreneurs, which are 17% of all small companies.
CEF will be rolled out in two phases. In the first phase, the Department for Business and Trade will provide 100% of the programme's funding via the British Business Bank, which will enable CDFIs to make more finance available to smaller businesses.
In the second phase, the British Business Bank will source additional funding from private sector investors, leveraging the government-backed funding to increase the amount of wholesale finance available under the programme.
Louis Taylor, CEO of British Business Bank, said:
"This is an important moment for the social impact lending market and one we're excited about at the Bank. The Community ENABLE Funding programme is designed to unlock finance across the UK's nations and regions for those small businesses who need it but have struggled to access it historically.
"We hope this can empower local community development finance institutions to support the communities they're a part of and generate the desired growth the country needs."
Small business minister Gareth Thomas said:
"Access to finance is one of the key barriers to growth for small businesses, and this announcement is a big step towards addressing some of those challenges.
"Community development financial institutions have that crucial local know-how, the ability to reach businesses that have fallen through the net, and this programme will support many firms to thrive and grow."
Theodora Hadjimichael, CEO of Responsible Finance, said:
"Many great businesses struggle to get the funding they need, so CDFIs are a lifeline. They have a long history helping businesses to grow and create jobs but have not always had enough funding themselves to meet demand.
"This game-changing investment will enable CDFIs to expand and support more small firms. We thank the government and our valued long-term partner the British Business Bank for backing businesses in communities across Britain by backing CDFIs."
In 2023 the social impact sector lent £102m to 4,546 small businesses, 98% of which were based outside of London, with 99% going to firms which had been declined by a mainstream lender.
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