Development Bank is boosted by £100m fund
THE new Development Bank of Wales has been launched with £440m of financial muscle to back growth-focused firms in Wales.
The bank, which is effectively the Welsh Government’s former whollyowned investment bank, Finance Wales, but with a wider remit, has also been boosted by a new £100m fund.
The £100m Wales Flexible Investment Fund has committed capital from Finance Wales legacy funds and funding from the Welsh Government to the tune of £77m – with the remainder projected to come from reinvestments back into the fund from interest, capital and equity realisations.
The bank, which will exclusively lend to Welsh firms, or firms from elsewhere relocating here, will provide growth finance through debt, mezzanine and equity.
It takes on a number of funds that Finance Wales managed on behalf of the Welsh Government, as well as the £170m Wales Business Fund which was launched by Finance Wales last year.
And it in five years it is targeting investing £80m a year, leveraging a further £92m in private finance. Interest of its debt will range from 4% to 12%.
However, it has yet to finalise a property deal for its headquarters in Wrexham – where by 2021, only 54 of the bank’s projected workforce of nearly 200 will be located.
The bulk of the development bank’s workforce will remain located at what were Finance Wales’ offices at the Capital Quarter scheme in the centre of Cardiff.
The Wales Flexible Investment Fund will provide up to £5m in a single round investment, with repayment terms on debt of up to 10 years.
Through the new bank, the Welsh Government is trebling the amount of micro finance available from £6m to more than £18m, with further funds also being developed.
With the Welsh Government’s Help to Buy Wales scheme, which like Finance Wales the development bank will manage on its behalf, alongside leveraged investment, the current £440m more than doubles.
And over the next five years it is on target to have an impact of over £1bn on the Welsh economy – supporting 1,400 businesses creating or safeguarding more than 20,000 jobs.
Economy and Infrastructure Secretary, Ken Skates said: “I am delighted we have been able to quickly progress Welsh Government’ plans to establish The Development Bank of Wales.
The bank will use Welsh Government funding to support investments that will help grow Wales’ economy both today and into the future and provide businesses with the support they need.
“As our businesses thrive and repay the loans, that money will be re-invested meaning that the capital doesn’t just help businesses succeed now, it funds the next generation of Welsh success stories too.”
Giles Thorley, chief executive of the Development Bank of Wales, and former CEO of Finance Wales, said, “Some 99% of all businesses across Wales are micro to medium size. They account for 60% of all private sector employment.
“As businesses face the uncertainty of Brexit, the need to provide stability and stimulate growth is more immediate than ever.”
The bank came out of a report from an independent panel, chaired by Prof Dylan Jones-Evans, which was tasked by former Welsh Government minister Edwina Hart to look at the merits of establishing a publiclyowned development bank for Wales.
It concluded that one should be set up working far more closely in co-investing alongside private funders, and in particular providing the gap funding to allow banks to invest more in Welsh firms.
The panel’s final report recommended that Finance Wales shouldn’t effectively evolve, as has proven the case, into a new development bank.
Prof Jones-Evans said: “Naturally I am delighted that the Development Bank of Wales is finally being opened this week and there is enormous expectation that Welsh businesses will finally have access to affordable finance that will help them to grow and develop.
“However, it is critical that the new bank focuses its strategy to ensure that the needs of Welsh businesses are at the heart of everything it does going forward, especially as Assembly Members were critical of its predecessor Finance Wales as not fully meeting the needs of small businesses across Wales.
“If it does that, then it may help to make a real difference to the Welsh economy.”
Ben Cottam, FSB Wales head of external affairs, said: “FSB Wales welcomes the Development Bank of Wales and the new £100m Wales Flexible Investment Fund.
“For smaller businesses across Wales, access to finance can potentially mean the ability to grow a business, hire staff or, indeed, start-up a new venture, and so we very much welcome the increased availability of funding to SMEs.
“It is important that the new Development Bank’s interaction with Business Wales as the ‘shop front’ for business support in Wales is seamless to ensure that businesses can be signposted to the most appropriate support.
“The new institution needs to be as much ‘development’ as it is ‘bank’ and it needs to be clear in the new Welsh Government Economic Delivery Plan where the organisation is going to be deployed to support the economic development vision”
“FSB’s recent report on the ‘Missing Middle’ highlighting the need to grow more medium businesses is a good example of where the Development Bank can be positively deployed to help address weaknesses in the Welsh economy and we will shortly bring forward proposals for developing self-employment in Wales”
“It is our view that the institution must take steps to address the concerns which were raised on access to finance in Professor Dylan Jones 2013 report, particularly around the cost of its services”
“We are very much looking forward to working with the new Development Bank as it moves forward and inform its new service offering.”
THESE are unprecedented times for Welsh business owners and entrepreneurs. Never has access to sustainable and effective finance in the market been so important.
As we prepare to leave the EU, we need to be working together to create long-term value in the Welsh economy that drives growth and encourages the development of sustainable home-grown industry.
That’s why we should be greatly encouraged by the launch of the new Development Bank of Wales.
This is a unique resource that can play a significant role in unlocking the potential of our economy.
Everyone from sole traders to midsized manufacturing businesses or IP-based technology businesses are set to benefit.
At IoD Wales, our members repeatedly tell us about the importance of access to flexible, quick finance to aid growth.
From capital investment to the exploration of new export markets, opportunities are limited if funding is constrained.
Indeed, this message was loud and clear when I led the review in 2014 to examine aligning Welsh Government non-financial support with the financial support that is available for businesses in Wales.
Business owners and entrepreneurs need a flexible, adaptable and fleet-of-foot approach.
They don’t want longwinded, drawn-out application processes.
They need to deal with lenders who have clear, concise and user-friendly lending criteria.
The Development Bank of Wales has a clear role and mission with dedicated account managers who are empowered to support businesses.
Their stated commitment to placing the customer at the heart of the business model is exactly as it should be.
What’s more, the fact that the Development Bank is able and willing to invest alongside other funders is pleasing to hear.
In my view, it’s just about doing what is right for individual business es, as is the case with Business Wales, the business support arm of Welsh Government that I chair.
Working alongside Business Wales
Robert Lloyd Griffiths says the new Development Bank of Wales is in a prime position to create long-term value
and the private sector, the team at the Development Bank now has the remit and the drive to bring about real, lasting change.
I am told that their experienced executives will take the time to get to know you and your business, so it really will be easier than ever before for businesses to get the capital they need to start up, strengthen and grow with new funds.
With more finance available to micro businesses and extended lending terms, loans from £1,000 to £5m are now available and longer repayment terms of up to 10 years are also on offer. That’s exactly what our businesses need.
I am particularly encouraged to see that the Development Bank is also trebling the amount of micro finance available, taking the total available to £18m. In total, £440m is being made available to Welsh businesses with further funds already under development. This money is available for both start-ups and established businesses.
Over the next five years, the Development Bank is targeted to have an impact of over £1bn on the Welsh economy.
As a result, it is expected to support 1,400 businesses with those businesses creating or safeguarding more than 20,000 jobs. These are significant numbers that should not be underestimated.
Innovation and growth amongst the SME and micro business sectors is at the very heart of our economy. The Development Bank of Wales is ideally placed to unlock this potential. That’s got to be good news for us all.
Robert Lloyd Griffiths is director of Institute of Directors (IoD) Wales and chaired the Micro-Business Task and Finish Group that led to the creation of Business Wales and the subsequent Wales Micro business Loan Fund