Our thinking

Finance for all

13 December, 2024

Most small businesses say their inability to grow comes from a lack of available finance. How many times have you heard it seems easier to raise £100m than £100,000?

Well, perhaps that’s about to change.

The British Business Bank (a government-owned development bank that exists to open up credit to SMEs as well as providing business advisory services) has launched a £150 million scheme to unlock £1 billion in loans from community-based finance firms, specifically targeting around 15,000 small businesses that traditional banks have previously turned away. This initiative is part of a broader effort to enhance access to finance for underserved businesses, particularly through Community Development Finance Institutions (CDFIs), which are not-for-profit organizations dedicated to providing financial support where conventional lenders fall short.

CDFIs have specialist skills and knowledge that makes them well placed to serve this market, while the private sector lenders can provide much needed wholesale capital and support to CDFIs. The private sector will always tend to lend to less risky investment areas. However, if government backed finance can offset some of that risk, it can open up a much larger market for the private sector.

By Emma Alajarin