The British Business Bank, which starts lending today (21 July) through peer-to-peer lender RateSetter, is considering the use of “securitisation” to create SME bonds in order to boost lending to small firms.
The state bank is considering using securitisation, which is turning an asset such as a mortgage into a tradeable security, to support independent lenders, particularly those who help small companies invest in equipment and machinery.
A spokesman for the bank said that it is looking at areas where creating markets for bundled debt can work. Calling the asset finance industry “interesting”, he added that some of the lenders who are strong in their own right are not sufficiently large to be able to access the market.
The bank therefore believes that there is a role to bring those together and create a mechanism whereby their funding can be bundled and then financed through SME bonds. However, this could be a controversial move, as securitisation is considered to be one of the main causes of the financial crisis.
Meanwhile, following news that the Competition and Markets Authority (CMA) is consulting on its provisional decision to launch a formal investigation into UK banks, there is a train of thought that suggests small and medium-sized enterprises (SMEs) could do more for themselves in this area.
Some analysts believe that SMEs suffering as a result of a lack of competition in the banking industry must do more to force improved lending conditions, citing an “apathy” amongst them when it comes to taking advantage of better services.
One commentator even suggests that one of the reasons new entrants offering better products and services struggle to make an impact in SME banking is that they cannot be bothered to switch to them. Meanwhile, another believes that the inquiry will simply come to the conclusion there are too few banks, which is hardly news to anyone.
