The Bank aims to bring billions of pounds of aid together, managing £2.9bn of existing Government debt and equity schemes, with an extra £1bn dedicated to areas such as non-bank lending.
The Government funding comes from the small business tranche of the Business Finance Partnership, a programme set up to ease the flow of credit to businesses by diversifying the sources of finance available to them.
The first allocation of funding was put forward by the Department for Business, Innovation and Skills (BIS) and £55m was assigned to four lenders: Funding Circle; BOOST&Co; Zopa and Credit Asset Management Ltd.
Three new lenders - Market Invoice, URICA and Beechbrook Capital - will gain access to a further £30m of Government funding. Each lender has vowed to attract more funding for theschme from investors in the private sector and it is hooped that they could boost the pool of credit available to an estimated £70m.
Overall, the seven lenders are predicted to attract non-government investment alongside government finance to create a lending total of more than £240m, in the hope that it will boost lending to SMEs.
The BIS will oversee the operations of the Business Bank as a provisional arrangement and it is predicted to be fully operation and independent by Autumn 2014. Until then, however, it will effectively be a branch of the BIS, which will have a duty and responsibility over how it is run.
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