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New UK bank launches targeting SMEs

A new bank, Cambridge & Counties Bank, targeting established small to medium sized enterprises (SMEs), has launched in the UK. 

The bank will provide SMEs with loans secured against commercial property as well as a highly competitive deposit account. In addition to this, it will also offer secured pension scheme lending, and has plans to launch professional firm financing, as well as other competitive savings accounts into both the retail and non-retail sectors.

The bank has a unique structure being jointly owned by Cambridgeshire Local Government Pension Fund and Trinity Hall, a College of the University of Cambridge. They each own 50% of the bank, which has a strong management team led by chief executive Gary Wilkinson who has held a number of senior roles in the banking and building society sectors.

The bank feels that now is an opportune time to launch, because many SMEs are finding it difficult to secure finance. Analysis of industry data by Cambridge & Counties Bank reveals that in the second half of 2011, over 60,000 loan and overdraft applications from SMEs worth as much as £3 billion, were rejected by banks.  New research from the bank reveals that 47% of businesses believe that their relationship with their main business bank is only average or bad.

Gary Wilkinson, Chief Executive, Cambridge & Counties Bank says: “We have been able to build a very strong and experienced management team, and launch at a time when many robust SMEs are finding it difficult to secure finance.  There is also a real need for increased competition in the banking sector.

“By placing a significant focus on developing a partnership type relationship with our clients through being easy to do business with and by focusing on plain English and transparency, we hope to have a significant impact on our markets.”

Mark Hoban, Financial Secretary to the Treasury, welcomed the announcement, saying: “I’m pleased to support a new bank that will focus on lending to the SMEs that make up such a vital part of the UK economy.  The Government remains committed to fostering more diversity in the banking sector, so we need new banks to enter the market to provide consumers and businesses with greater choice.”
The bank will use a local personalised relationship approach consisting of business development managers focusing primarily on its heartland regions of Cambridgeshire, Northamptonshire and Leicestershire, coupled with a national broker coverage model.  This will allow balanced growth across geographies, market sectors and property types, avoiding inappropriate concentration risk.

The bank will also be looking to secure business through recommendations from third parties including intermediaries, specialist finance brokers and business transfer agents.
The bank will lend to SMEs that typically have an annual turnover of less than £25 million, and assets valued under this.  Loans will be between £50,000 and £1 million. 

The bank will have two main mortgage products. One will be mainstream commercial mortgages to business owners, secured against commercial property. It is anticipated that 40% – 50% of SME owner/occupier loans will typically be used to refinance working capital. The second product will be secured against mainstream commercial mortgages to commercial property investors.  Products will have a term of between 3 and 20 years, with loan to value (LTV) of up to 70%.

The bank will also offer loan facilities to SIPP and SSAS schemes secured against commercial property with terms of up to 20 years. Loans will be to a maximum 50% of the pre-borrowing fund value, and no more than 70% LTV of the asset purchased.  

The bank plans to offer professional firm financing at a later date.
The Cambridge & Counties Bank plans to offer a range of non-retail and retail deposit accounts. Its first is the 30 Day Notice Business Savings Account, which is a 30 day notice account targeting SMEs and paying 2.25% Gross/AER with a minimum balance of GBP1,000. 
Paul ffolkes Davis, Bursar, Trinity Hall, Cambridge and Chairman of Cambridge & Counties Bank, says: “We regard Cambridge & Counties Bank as an unprecedented opportunity to marry a strong investment promising good returns with support for small businesses at a time when they need it most. While the traditional high street banks are pre-occupied with their legacy problems, which are having a negative impact on their lending, by contrast Cambridge & Counties Bank has no past and is looking forward to a successful future.  With the outlook for higher education funding looking ever more challenging, this investment is also intended to strengthen the College’s endowment returns in order to secure our world-class teaching and research for coming generations of Cambridge students.”

Nick Clarke, Cambridgeshire County Council Leader and non-executive director of Cambridge & Counties Bank, says: “The new bank will give local SMEs a real boost and the chance to grow, at a time when it’s proving hard to secure funding even for viable business propositions. This venture will not only produce a good return for the pension fund, but also means that money from public services pensions is being used to support the economy, create jobs and improve the quality of life for our communities. The return on investment will reduce the burden on local taxpayers and leave more money available for frontline services. The bank has been properly assessed and is a very good investment. I am really pleased that we are taking a lead here and investing with Trinity Hall in this exciting opportunity."

Professor Merlin Strone, Head of Research at The Customer Framework, says: "The  launch of Cambridge & Counties Bank is great news for SMEs.  Access to funding for businesses is tight and if the economy continues to struggle as many predict, banks may become even more less willing to lend. 

“If we are going to secure greater lending for businesses and help kick-start the economy, we need more new banks that don’t have a back book of loans, many of them poorly performing, hindering their ability and willingness to lend.”  

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