A property lender has said that it plans to offer SMEs “hundreds of million” of pounds worth of funding to business owners who are struggling to access bank finance.

The product designed by Castle Trust, which lends on UK property on a shared equity basis and launched last year, will offer SMEs a loan which is “free of monthly capital and interest repayments”.

The fund, which will provide so-called “Partnership Mortgages”, will allow SME owners to borrow up to 20 per cent of the value of a personal property.

Repayment is then made once the property is sold or at the end of the mortgage’s term, with Castle Trust then requiring 40 per cent of any increase in the property’s value since the loan was issued.

Properties can be encumbered but borrowers must own at least 40 per cent of the equity in the premises against which they wish to secure the loan.

Any terms agreed, however, are entirely down to the strength of the borrowers equity, with no need for an analysis of the performance or financial viability of the SME itself.

The lender has conceded that strong growth in the housing market, however, could make the facility far more expensive than a traditional business loan.

Instead, it is hoped that the product will offer an option to those who have already been rejected for mainstream business finance, or who are unhappy with the relative expense of borrowing.

Castle Trust is backed by £65 million worth of investment from American private equity managers JC Flowers and chaired by former chairman of the FSA Sir Callum McCarthy.

The firm recently axed three senior members of staff – Head of Lending James Neave, Head of Marketing Mikkel Bates and Marketing Manager Stephen Fairweather – in a bid to change the direction of its future growth.

Speaking about the introduction of the fund, Sean Oldfield, Castle Trust’s Chief Executive, said: “Many businesses are finding it difficult to secure funding from banks, but a number have owners who have significant equity locked up in their home”.

“We’re not interested in the financial viability of a business, just the equity in the business owner’s home. There is no in-depth assessment of the financial strength of a business”.