The British Business Bank has agreed to provide a £100m facility to Hitachi Capital UK to fund a portfolio of newly originated small business asset finance receivables.
The transaction is the first of the British Business Bank’s Enable Funding programme, which aims to increase significantly the supply of leasing and asset finance to smaller businesses in the UK. The European Investment Fund will guarantee 50% of the facility.
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The programme will allow Hitachi Capital UK to expand substantially its provision of business asset finance. Hitachi Capital UK works through finance brokers and vendor organisations to provide a diverse range of products to smaller businesses including hire purchase, operating lease and finance lease solutions.
The programme aggregates asset finance portfolios from these important mid-market providers in a warehousing financing facility.
In order to build the critical mass necessary to securitise the assets, the Enable Funding programme will be announcing similar agreements with other funders over the next 18 months. Facilities will range from around £25m to £150m, and the programme will aim to refinance the warehouse facilities when receivables total approximately £300m. This refinancing, the first such transaction of its type in the UK, will allow institutional investors access to a large and highly diversified pool of SME debt, and is intended to help kick-start asset finance securitisation more widely.
Gavin Wraith-Carter, general manager, Hitachi Capital Business Finance said: "Being the first funder to take part in an ENABLE funding programme transaction reinforces our commitment to understanding the specific needs of SMEs and offering tailored financial solutions that fit their business requirements. As a leading provider of business asset finance, we offer SMEs a valuable alternative to mainstream lending, allowing businesses to free up cash flow and to budget appropriately for the equipment they need to remain competitive. This initiative is a fantastic example of how Hitachi Capital looks at new and fresh ways to generate increased use of alternative lending to UK SMEs."
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By GlobalDataReinald de Monchy, Managing Director, Wholesale Solutions at the British Business Bank, said: "This £100 million transaction with Hitachi Capital is the first in our new ENABLE Funding programme, which aims to boost the availability of asset finance. We are planning a number of further transactions over the next 18 months, and to refinance these facilities through securitisation once they achieve the required critical mass."
Bernard Skivington, director, Wholesale Solutions/Asset Finance at the British Business Bank, said: "Asset finance is vital to many high-growth small and medium sized businesses. As these businesses grow and scale-up they will look to buy or replace plant and equipment, and it is essential that they are able to get the funding they need to do so."
George Passaris, Head of Securitisation at European Investment Fund, said: "We are very pleased to be participating as guarantor in this innovative facility for Hitachi. The involvement of EIF in the Enable programme signals EIF’s attention towards the UK non-bank finance providers and EIF’s will to facilitate additional financing for UK SMEs."
