Agency to Bundle SME Debts and Sell to Investors

According to the Business Secretary, Vince Cable, the government’s new business bank could include an agency which will package up SME debts and sell them onto investors in a bid to boost lending.

In September, Mr Cable unveiled plans for a business bank, which would financially support SMEs throughout the UK by providing an alternative source of finance, in an attempt to break the reported stranglehold of the high street banks.

The lastest move to include an agency which will sell SME debts was announced earlier this week by the Business Secretary, who revealed that an agency for business lending is being planned, which would package loans into various bonds, with the aim of bringing in a new source of money into the UK debt market.

Mr Cable, added: “An agency is part of the current thinking. We’d need to think it through very carefully and decide exactly what role government guarantees and financial support would play.

“It’s one of the ways to get money into small businesses and we’ve got to try everything because there is a serious problem of supply of finance, not just demand.”

However, Mr Cable also revealed that the government need to give careful consideration to the design of the agency, as it would involve a renaissance for called securitisation, which is associated with the kind of financial engineering that led to the economic crisis.

Milsted Langdon Director, Peter Groves, specialises in strategic business and tax planning, services for high net worth individuals and professionals.

Posted in Blog.