By Steve Slater
LONDON (Reuters) - The state-owned British Business Bank is providing a 100-million-pound ($151 million) facility to finance firm Hitachi Capital to fund loans to small businesses to buy equipment and other assets.
The British Business Bank was set up in 2012 by the UK government to boost credit to small and medium-sized firms and fill a hole left by big banks scaling back lending to bolster capital and meet tougher regulation after the financial crisis.
The Hitachi Capital facility, announced on Friday, is an attempt to kick-start the market for asset finance for small businesses, and the bank said it aimed to follow with more deals to take lending up to about 300 million pounds - loans which could then be securitised and sold to investors.
Asset financing is seen as an alternative to mainstream lending, allowing businesses to free up cash flow and budget appropriately for the equipment they need.
The facility provided to Hitachi Capital will be 50 percent guaranteed by the European Investment Fund. Hitachi said it would allow it to substantially expand its asset financing.
The British Business Bank's aim is not to compete with banks, but to facilitate lending by offering finance in partnership with private financial institutions.
"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," said Reinald de Monchy, the bank's managing director of wholesale solutions.
(The story has been refiled to correct headline and story to make clear deal is for asset financing, not asset-backed loans.)