The commercial business arm of the British Business Bank, British Business Bank Investments, has invested £18m in Blackburn and Manchester-based Praetura Asset Finance.

The investment, comprising £15m of matched funding and an additional £3m of expansion capital, will support at least £36m of smaller business finance. It is the first British Business Bank Investments transaction to combine matched and unmatched funding in this way, it said.

Praetura Asset Finance provides asset-based finance, hire purchase, finance leasing and refinancing facilities of between £10k and £2m to businesses across a variety of sectors, including construction and plant, engineering, printing, transport, waste and recycling, and agriculture.

Catherine Lewis La Torre, chief executive officer, British Business Bank Investments, said: “British Business Bank’s recent Small Business Finance Markets Report indicated strong growth in asset finance volumes over the last two years, and we see asset finance as an important option for smaller businesses looking to realise their growth potential.

“We are keen to support the growing demand for this type of finance and are pleased to be making this investment in Praetura Asset Finance. By supporting relative newcomers to the market – Praetura was established in 2014 – we are actively increasing lending choices for smaller businesses across the UK.”

Mike Hartley, managing director of Praetura Asset Finance, said: “We are delighted at Praetura to be partnering with British Business Bank Investments. The syndication of our senior debt, alongside the expansion capital facility, provides us with real stability to support our continued growth.

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“Like our other institutional funders, British Business Bank Investments shares our aim of providing suitable and targeted finance solutions for SMEs. These facilities will help meet the objectives of both parties, and to secure Praetura’s market position in the coming years.”

Simon Goldie, head of asset finance at the Finance and Leasing Association, added: “This latest announcement shows the increasing prominence of asset finance in small business funding. We welcome this new investment, which will enable another FLA member firm, Praetura Asset Finance, to help even more firms grow and prosper in the UK economy.”

British Business Bank Investments makes loans to or investments in finance providers to smaller businesses. It acts as a catalyst to increase both supply and diversity of finance for smaller businesses, while earning an attractive, commercial return for the UK taxpayer.

British Business Bank Investments said asset finance is becoming an increasingly popular choice for smaller businesses, with FLA figures showing growth in asset finance new business (primarily leasing and hire purchase) of 11% in 2015 to £28.1bn (excluding high value deals). This is the market’s second consecutive year of double-digit growth.