Banks pledge almost £40m for Scottish Loan Fund

Clydesdale Bank, Lloyds, RBS, Santander and other investors are increasing access to finance for businesses by investing almost £40 million in the Scottish Loan Fund (SLF), First Minister Alex Salmond announced today.

Speaking in Edinburgh, Mr Salmond welcomed the private sector investment which builds on the public sector’s commitment of £55 million. This announcement means a total of more than £94m is now available through the SLF to eligible small and medium sized enterprises (SMEs).

Lloyds, RBS and Santander have each invested £9.4 million, with the potential to rise to £15 million as the Fund grows, while Clydesdale Bank and other investors have each invested £5 million in the Fund which will offer new lending opportunities for growing and exporting enterprises.

Ensuring improved access to finance to support growth and investment is a key part of the Scottish Government’s growth strategy, as set out in the Economic Recovery Plan. Businesses which demonstrate growth or the intention to grow and exporting businesses can apply to the SLF for finance of between £250,000 and £5 million.

Managed by independent fund managers Maven Capital Partners, the SLF is a product introduced by the Scottish Investment Bank (SIB), which is a division of Scottish Enterprise. The Fund opened for business earlier this year and has so far received 62 notes of interest. Maven expects that the fund should issue its first loan offers to Scottish companies in April 2011.

The announcement follows today’s publication of the SME Access to Finance Survey which shows that, while there are signs of improvement, lending remains a major issue for firms trying to access new finance for investment and growth.

First Minister Alex Salmond said:

“Scotland’s economy is strengthening and it is essential that Scottish businesses have the chance to seize new opportunities for investment and growth through accessing the finance they need to fulfil their potential.

“I am delighted that RBS, Lloyds, Santander, Clydesdale Bank and others are supporting the loan fund and I would encourage other investors – and in particular the other banks present in this market but not yet investing in the Scottish Loan Fund - to stand alongside us in this exciting venture that will help our firms deliver new jobs, investment and growth for Scotland.

“Today’s Access to Finance Survey shows that lending remains a major issue for SMEs in Scotland and that lending in 2010 was lower than the previous year, reflecting a combination of weak demand from business and constraints in supply of lending. It states that 38 per cent of firms report the cost of new finance has risen compared to 2009.

“This £40 million of private investment announced today, matching our own £55m, reflects our continuing work with the private sector to tackle this problem and improve access to finance for small and medium sized enterprises (SMEs) so that their growth can contribute to Scotland’s economic success.

“Scotland is now the only country in the UK with a trend of rising employment and falling unemployment. However there must be no let up in our efforts to strengthen the economy and that is why the SLF is working to ensure accessing finance does not hold our SMEs back. We continue to demand that next week’s Budget focuses on increasing capital spending and reducing fuel costs.

“Growing and exporting firms make a significant contribution to Scotland’s economy and this Fund targets their need to access to a broader range of finance than is currently available.

“This investment takes us closer to achieving our aspiration of a £150 million loan fund. I am delighted that RBS, Lloyds, Santander, Clydesdale Bank and others are supporting the loan fund and I would encourage other investors – and in particular the other banks present in this market but not yet investing in the Scottish Loan Fund - to stand alongside us in this exciting venture that will help our firms deliver new jobs, investment and growth for Scotland.”

Chairman of Scottish Enterprise Crawford Gillies said:

"We very much welcome the significant initial investment Scotland's private financial sector has pledged to the Scottish Loan Fund. Such commitment is a strong indication of the financial sector's confidence in Scottish growth and exporting companies to expedite Scotland's economic recovery. As with the Scottish Investment Bank's co-investment approach to equity finance, our partnership with the investors and the fund manager signals a collaborative approach to the public and private sector working shoulder to shoulder to support Scotland's ambitious companies."

Lloyds Banking Group Board Executive Archie Kane said:

“Lloyds Banking Group is committed to supporting the Scottish economy and we are delighted to play our part in the Scottish Loan Fund. This is in addition to the £500 million of lending provided to Scottish small and medium sized businesses last year. These lending taps remain open while the absolute cost of borrowing is around half that in 2007. We are giving real support to businesses across Scotland allowing them to create new jobs and keep the economy moving."

Clydesdale Bank Chief Executive David Thorburn said:

"Clydesdale Bank has consistently helped to support companies to invest for growth. We are delighted to contribute to the Scottish Loan Fund so that it can also help Scottish businesses to grow."

RBS Managing Director Commercial Banking in Scotland Graham Galloway said:

“RBS is lending more than £80m a day to SMEs and we are punching well above our weight in terms of lending to businesses. We're always looking at new initiatives to continue to aid the recovery and the SLF is such an opportunity. RBS has already created a £1 billion Manufacturing Fund and a £100 million Franchise Fund. RBS is committed to lending to businesses in Scotland and welcome this latest initiative to stimulate demand for credit.”

Santander UK plc Head of UK Corporate and Commercial Banking Steve Pateman said:

“Santander is delighted to be participating as a cornerstone investor in the Scottish Loan Fund (SLF). The Fund will play an important role in helping to fill the funding gap experienced by small and medium sized businesses, in turn helping them to invest and expand and drive forward the economic recovery in Scotland. This investment marks the first stage of a wider Santander SME support strategy, and we look forward to supporting the growth of Scottish businesses both through this fund and also through our traditional banking products and services.”

CBI Scotland Director Iain M McMillan said:

“CBI Scotland warmly welcomes this news. The Scottish Loan Fund and the additional investment announced today show the public and private sector working in partnership to deliver an initiative which will directly assist in the growth of Scottish firms. The Scottish Government is to be congratulated on this.”

STUC Assistant Secretary Stephen Boyd said:

“The STUC welcomes the additional finance for the Scottish Loan Fund announced today. This represents another important milestone along the Scottish Investment Bank’s evolution into an institution that will effectively tackle the long-standing problem of access to patient and affordable funding for Scottish businesses. The impact on sustainable growth and jobs is potentially huge”.

Institute of Directors in Scotland Executive Director David Watt said:

“The Institute of Directors in Scotland has enthusiastically supported the development of the SLF and is delighted with today’s announcement – an excellent example of collaboration between the public and private sectors”

Maven partner Andrew Craig said:

“Maven is delighted that Lloyds Banking Group, Royal Bank of Scotland, Santander, Clydesdale Bank and other investors have together committed almost £40 million to the Scottish Loan Fund. The team at Maven looks forward to working in partnership with all of the stakeholders involved to help deliver the objectives of the fund”

Highlands and Islands Enterprise Chief Executive Alex Paterson said:

"The creation of the Scottish Loan Fund is an important step in helping ambitious businesses which want to grow, It will enable them to access the funding they need to realise their potential, bringing additional value to the economy. The investment by the banks is a further indication that facilities are becoming accessible again, albeit businesses need to present strong borrowing proposals.”