The state-owned British Business Bank will make up to £1bn of guarantees available to banks that that lend to small builders. This will reduce the amount of capital these banks are required to hold against such small builder finance, encouraging additional lending to smaller developers.
The BBB has struck deals with specialist lenders to help with small builder finance, but this is the first time a dedicated scheme has been set up for the industry.
ENABLE Build is a new variant of the BBB’s existing ENABLE guarantee programme, which takes on a portion of the lender’s risk on a portfolio of loans to smaller businesses, in return for a fee.
The scheme is open to applications from banks where at least 80pc of the loans are to developments in England. (Housing policy in Scotland, Wales and Northern Ireland is developed to their governments.)
The proportion of homes put up by small builders has halved since the late 1980s. Many complain that access to finance is one of the biggest hurdles, as banks became more risk-averse after the financial crisis.
Communities minister James Brokenshire said: “The ENABLE Build programme is now open for business, providing up to £1bn of guarantees to ensure smaller house builders can continue their vital role in building the homes our country needs.”
Reinald de Monchy, managing director, guarantee and wholesale, British Business Bank, added: “The ENABLE Build programme will allow us to build on the ENABLE Guarantee’s success in supporting smaller housebuilders that have traditionally struggled to access the finance they need. Working alongside BEIS, MHCLG and Homes England to tackle both access to finance and the UK housing shortage, this programme is an excellent demonstration of how Government can work across departments to tackle a multifaceted issue.”