Braveheart awarded right to lend money

Published on Monday 28 September 2009 23:13

BRAVEHEART, the angel investor, could soon become a mainstream business lender, after gaining approval to operate under a government enterprise scheme.

Chief executive Geoffrey Thomson said he wanted to use the scheme to establish a fund to lend directly to small businesses, which are currently being "starved of capital".

The Perth-based company, which invests mainly in early-stage technology companies on behalf of wealthy individuals, yesterday was awarded "accredited lender" status under the government's Enterprise Finance Guarantee scheme. Launched in January, the scheme gives approved lenders a 75 per cent government guarantee on loans of up to 1 million to small and medium-sized businesses.

Initially, Braveheart plans to use the scheme only on loans to companies in which it has equity stakes. But Thomson said that, if backers could be found, then Braveheart would set up a new vehicle to lend cash to outside companies.

Thomson has been warning for almost a year about the impact a lack of credit is having on business, and claims the situation is not improving.

"There's no appetite from the banks to lend to the sort of companies they were lending to 18 months ago, and that's a major problem for these companies," he said. "There's a great market need out there, and somebody needs to stand up and do something about it."

While Thomson said that he would be prepared to talk to anyone willing to provide funding for a lending vehicle, the Braveheart chief said that for it to be effective then it would need to have about 10m.

Braveheart has already held brief conversations in the City about a fund. Thomson said the ideal candidate would be a major financial institution not directly involved in banking, such as an insurance group.

Claiming the vehicle could provide "a major public relations boost" for any financial institution prepared to get involved, Thomson said such a venture could also be highly profitable. "We think we can make a very good return on it, so from a commercial point of view, it makes sense."

While Braveheart would use the same criteria on lending as it did when deciding on investing in businesses in return for equity, Thomson said directors would not have to give up stakes.

The Federation of Small Businesses in Scotland has warned there is a chronic lack of competition in the lending market, claiming Royal Bank of Scotland and Lloyds, which account for at least three-quarters of all lending to small firms, were operating a "duopoly".

An FSB spokesman said the organisation welcomed new players into the market.

The federation recently conducted a survey which found that 38 per cent of its members would be prepared to immediately switch to the Post Office bank if it offered business lending.

"That shows that there is the opportunity for new players to enter the market," the spokesman said.