Clydesdale Bank, a UK subsidiary of National Australia Bank Group, has set up a venture debt operation after a pilot with three companies last year. Clydesdale’s development comes as a recent report calls for banks to adjust their lending criteria ahead of the UK’s Budget this week.
Graeme Sands, director of corporate and structured finance at Clydesdale, is leading the new unit, which is expected to hire people to expand the franchise outside of Scotland after receiving board approval.
Last year, Clydesdale lent £2.5m ($4m) to Touch Bionics, as well as to Red Spider Technology and Cascade Technologies as its pilot into lending to high-growth, venture capital-backed companies with intellectual property (IP) as collateral in case of default. Separately, an insurance group is developing a policy so smaller firms can protect their IP against infringement.
Clydesdale can also potentially take equity in some of its portfolio through warrants or options.
The bank has also provided £5m to the £94.2m Scottish Loan Fund being organised by the government growth and export-orientated businesses.
Clydesdale’s new unit comes as US-based venture debt lender Silicon Valley Bank awaits its UK banking licence.
The National Endowment for Science, Technology and the Arts (Nesta), a quasi-public sector organisation becoming a charity, in a report (click here to see PDF), Vital growth: the importance of high-growth businesses to the recovery, found the fastest-growing businesses found it harder to access finance than other companies because they are judged less creditworthy.
Nesta has calculated between 6% and 7% of companies hired 49% to 54% of jobs between 2002 and 2010.