British Business Bank enables United Trust Bank to offer £500m in development finance

by: Edward Murray
  • 31/10/2017
  • 0
British Business Bank enables United Trust Bank to offer £500m in development finance
United Trust Bank (UTB) will provide more than £500m in development finance to UK SME housebuilders following a deal with the British Business Bank (BBB).

The British Business Bank’s ENABLE Guarantee programme encourages banks to increase their lending to SMEs by reducing the amount of capital required to be held against such lending.

Under an ENABLE Guarantee, the UK Government takes on a portion of the counterparty’s risk on a portfolio of loans to smaller businesses in return for a fee. In this instance UTB will allocate this additional capital to increase its funding to new build and redevelopment projects undertaken by SME housebuilders and developers.

Graham Davin, chief executive officer of United Trust Bank, said: “We are now able to promote greater access to funding for SME home builders. Property development funding is a complex area where specialist banks can make a large difference, but the capital requirements are onerous, and mitigate against specialists allocating capital to the sector.”

He added: “The culmination of our joint efforts to adapt the BBB’s existing guarantee to make it suitable for property development loans is a meaningful improvement to the capital efficiency of the bank for these loans. This allows us to support more house building projects across the country.”

 

High capital requirements

Keith Morgan, chief executive officer of the British Business Bank, said: “Banks have frequently reported that the high capital requirements associated with development lending have restricted their ability to lend to SME housebuilders. Our ENABLE Guarantee is specifically designed to address this issue.”

The deal was welcomed by Brian Berry, chief executive of the Federation of Master Builders (FMB).

He said: “Nine years after the financial crisis, the FMB’s 2017 House Builders’ Survey shows more than half of SME house builders are still saying that difficulties accessing finance are proving a major barrier to their ability to build more new homes. These difficulties make it much harder for existing SME house builders to flourish and grow and deter new firms from entering the market. This results in a less dynamic house building sector that is less able to expand to build the homes we need.”

He concluded: “The British Business Bank’s action to help ameliorate this is a big step forward and we hope that this agreement with United Trust Bank proves a successful model that can be replicated and extended.”

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