26^th July 2024

Statement from the Directors of Business Loans Scotland

Cessation of funding from the Scottish Government for the Scottish Growth Scheme

All Members, Directors and employees of BLS are extremely disappointed with the decision by the Scottish Government to cease funding of the Scottish Growth Scheme.

The Scottish Growth Scheme – Business Loans Scotland Debt Finance LP (the Fund) was incorporated as a Scottish Limited Partnership in December 2018 (SL033477), with the Scottish Ministers appointed as the Limited Partner and a new dedicated subsidiary, BLS Management Services Ltd, appointed as the General Partner. The Scottish Growth Scheme, which is wholly financed by the Scottish Government, allowed the Fund to provide loans, ranging from £25,000 to £250,000 to eligible, small and medium sized businesses (SMEs) across Scotland.

Business Loans Scotland (BLS) is a unique, purpose built consortium of Scotland’s 32 local authorities, incorporated as a company limited by guarantee and administers a number of funds providing loan finance to new and growing SMEs throughout Scotland. BLS evolved from two previous funds, namely the West of Scotland Loan Fund, which started lending in 1996 and the East of Scotland Investment Fund, which started lending in 2010, both of which supported over 2,000 businesses with £47 million of funding.

Business Loans Scotland with a track record and pedigree now approaching 30 years of managing loan funds was appointed as the Fund Manager to the Scottish Growth Scheme – Business Loans Scotland Debt Finance LP in December 2018.

BLS excelled in delivering its original investment target of £7million and indeed did so some two years ahead of schedule, continuing to lend to small and growing business during the Covid pandemic. Having achieved its original target, BLS was reliant on further rounds of funding from the Scottish Government to allow it to continue lending to SMEs.

Since the start of the Fund in January 2019, BLS issued a total of 190 loans for over £16.2 million to 166 businesses in 26 Local Authority areas, with an average deal size of £85k.

A summary of the Fund’s key achievements to 31st March 2024 is detailed below:

• Value of Loans Invested: £16.2 million

• Value of realisations (cash returned to the Fund): £7.75 million

• No of SMEs receiving investment support: 190

• No of new SMEs receiving investment support: 57

• Private Sector Leverage: £36.6 million, a leverage of 2.26

• New of new jobs created (actual): 658

• Increase in sales (forecast): £309 million

The request for further funding for 2024-25 was made to Scottish Government in October 2023.

On Friday 19th July 2024, BLS received the news that the Scottish Government was not going to provide any funding for 2024-25. The reason given by the Scottish Government was the deeply challenging financial situation which has been compounded by a material reduction in the Financial Transactions budget.

Business Loans Scotland, which employs 7 members of staff, its Members and Directors are all extremely disappointed with this decision. The raison d’etre of the Scottish Growth Scheme was to address market failure and increase the supply of finance to new and growing businesses across Scotland.

Without the Scottish Growth Scheme, a larger gap in the “access to finance” market has just been created for those SMEs seeking growth finance as they are not able to raise finance from other commercial sources. As the Scottish Growth Scheme is not being recapitalised and will no longer be lending to SMEs across Scotland, this decision, which will be sorely felt in the market, can only have a detrimental impact on the ability to grow the Scottish economy.

For any further information please contact Andrew Dickson, Fund Manager at fundmanager@bls.scot