British Business Investments (BBI), the investment arm of wholesale funder British Business Bank (BBB) has injected £25m (€28m) of equity capital into Secure Trust Bank (STB).

The capital falls under Tier 2 – the riskier, supplementary tier of a bank’s capital, including instruments such as subordinated debt and convertible securities. The capital raise had been mulled by STB in May.

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Paul Lynam, chief executive officer of STB, said: “Our core SME operations have lent over £1 billion directly to UK businesses and smaller housebuilders since 2015.

“We are [also] the UK’s third largest retail finance lender and help thousands of retailers sell their products via the provision of promotional finance and our motor finance offerings help car dealers sell tens of thousands of cars each year.

“We are delighted to enter into this transaction with British Business Investments, which supports our ambitions to increase our lending, directly and indirectly, to UK businesses in the years ahead.”

Catherine Lewis La Torre, chief executive of BBI, said: “Our investment in Secure Trust Bank – a fast-growing challenger bank – shows our continued commitment to increasing the diversity of smaller business finance in the UK.

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“A diverse finance market means that smaller businesses benefit from more choices and better terms that increased competition can offer. We believe our investment will not only help support Secure Trust Bank’s strong growth trajectory but will also drive the bank’s ability to increase their lending to this important part of the finance market.”

Secure Trust Bank, the parent of non-prime motor finance lender Moneyway and retail finance provider V12, reported a 21% year-on-year drop for asset finance business for the first half of 2018, with business for the period shrinking to £87.9m.