Santander unveils its £200m plan for small business loans

SANTANDER has committed a further £200 million in lending to small firms as the Spanish group raises the stakes with its British rivals.

The fresh funds will be made available through a new growth capital programme called Breakthrough, which is designed to support small, rapidly-expanding businesses.

Firms with turnover between £500,000 and £10m and a track record of 20 per cent growth in revenue, profit or employment are eligible to apply.

Experian says there are 715 smaller fast-growth businesses in Scotland with turnover of up to £10m. They employ 33,915 people and have a combined value of £777m.

The programme is part of a wider drive to increase Santander’s share of the UK business banking market from 4 per cent to 15 per cent.

It is being run through the bank’s corporate, commercial and business banking arm, which was established following a restructuring in March of this year.

The Breakthrough programme is in addition to Santander UK’s existing support to British businesses, including its pledge to lend £4 billion to SMEs in 2011, as part of the Merlin agreement with the Government. Santander is ahead of these commitments with lending to SMEs reaching £3.19bn in the third quarter.

Santander chose not to participate in the government’s business growth fund which is targeted at bigger firms.

Yesterday’s launch at Glasgow University came as news emerged that Santander is seeking a public relations agency to help it become a more integral part of corporate Britain. Santander’s share of the UK business market is expected to rise to about 10 per cent once it completes the acquisition of 318 branches which Royal Bank of Scotland was forced to sell as a condition of its £54bn taxpayer bail-out. That deal is now expected to complete in the first quarter of next year. It includes seven NatWest-branded branches in Scotland, plus the retail and small business customers associated with those outlets. In anticipation of the deal going through, Santander has opened a small regional corporate banking centre in Edinburgh to operate alongside an existing centre in Glasgow acquired as part of the 2010 takeover of Alliance & Leicester.

Steve Pateman, executive director of corporate, commercial and business banking, said after the launch that Santander will open a third Scottish regional banking centre in Aberdeen by February next year. This will be followed by centres in Dundee and Stirling in mid-2012.

“We see Scotland as an opportunity to grow,” Pateman said.

Though there is no set amount for the size of loans available from Breakthrough, Pateman said they would probably tend to be in the region of £250,000 to £500,000. He described the loans as “extremely competitive” compared to traditional mezzanine finance.

Unlike mezzanine funding, Breakthrough will not require owners to relinquish equity in their business. Pateman said the programme was designed to fill the void in funding for small high-growth firms that has emerged in the wake of the banking crisis.

“We know that there is a recognised funding gap for companies with a turnover of under £10m looking for growth capital, and we want to help fill that gap,” he said.

“This is the role that banks can play in supporting a private-sector led recovery and stimulating local economic growth.”