UK Government-owned British Business Bank is to provide a £51 million ($74 million; €65 million) secured loan to non-bank lender LDF, owned by private equity firm Cabot Square Capital, to provide asset-based and leasing loans to small British companies.
The agreement is the British Business Bank’s second deal under its so-called ENABLE Funding programme, which aims to boost lending to small companies that have been struggling to access finance from traditional lenders. The facility follows a £100 million deal for Hitachi Capital (UK) in October last year, and is 50 percent guaranteed by the European Investment Fund.
“Access to finance, particularly for asset procurement, remains a critical barrier to success for many smaller businesses and making this more readily available is something that we are fully behind,” said LDF managing director Peter Alderson.
LDF – formerly LeaseDirect Finance – was bought by Cabot Square Capital in 2013 from Anglo-South African bank Investec. In November last year it bought Scotland’s First Independent Finance to take its annual lending capacity to about £400 million. It offers loans that can be used to refurbish business premises, buy new vehicles or cover the cost of tax bills.
The British Business Bank was established in 2013 to unlock up to £10 billion of finance for UK business, and is wholly owned by the British government. It does not invest directly, but operates through agreements with some 80 partner lenders, funds and platforms. These agreements are designed to incentivise investment by those institutions and their investors.
The ENABLE Funding programme has been created for smaller lenders focused on asset and lease financing that often are unable to access capital markets for their own funding. The British Business Bank hopes to make more funding agreements this year, and aims to warehouse the asset finance receivables in one structure. Once that structure has reached £300 million or more, it intends to refinance it via capital markets at a lower cost of capital than the lenders could achieve individually.