Encouraging private sector investment
Business Finance Partnership (BFP)
We set up the Business Finance Partnership to invest £1.2 billion in increasing lending to small and medium sized businesses from sources other than banks. This money is being matched with at least an equal amount from private sector investors and will be invested on fully commercial terms.
The Business Finance Partnership has 2 strands.
The first strand invests in fund managers who lend to medium sized businesses with turnover of up to £500 million. The first 6 funds have now been set up and together they manage £863 million of government investment alongside over £1 billion from private investors.
So far the scheme has helped create around £5 of lending for every £1 of taxpayers’ money. A total of £172m of government money has been used by the lenders alongside an additional £705m from private sector investors to lend a total of £877m to 18 medium-sized businesses and 880 small businesses.
Prospective medium sized business borrowers should contact these funds directly. The 6 funds are:
- Alcentra: contact Graeme Delaney-Smith email@example.com 020 7367 5003
- Ares: contact Mike Dennis firstname.lastname@example.org 020 7153 4631
- Hayfin: contact Mark Tognolini email@example.com 020 7074 2906
- ICG: contact Max Mitchell firstname.lastname@example.org 020 3201 7736
- M&G: contact James Pearce email@example.com 020 7548 2695
- Pricoa: contact Ed Barker firstname.lastname@example.org 020 7621 8429
We will confirm details of further investments later in 2013.
The second strand of the Business Finance Partnership invests in non-traditional lenders that provide an alternative source of lending for small businesses with turnover up to £75 million. Seven different lenders have received £85 million of government investment and will lend more than £240 million to small businesses by attracting matching private sector investment. Prospective small business borrowers should contact these lenders directly. The lenders are:
- Beechbrook Capital will provide mezzanine loans to small businesses
- BOOST&Co will provide larger loans to small businesses
- Credit Asset Management Ltd (CAML) provides leasing and professional loans
- Funding Circle is an online platform that allows small businesses to borrow directly from investors
- Market Invoice gives small businesses advances on invoices from corporate customers
- URICA is launching a new model of supply chain finance
- Zopa is an online platform that allows small businesses to borrow directly from investors
Start-up Loans Scheme
The scheme provides start-up finance and advice for 18 to 30 year olds. The scheme started in September 2012 and will provide £82.5 million to young entrepreneurs.
It’s run by the Start-up Loans Company (a government-owned organisation) and offers young entrepreneurs money to start their businesses (seed capital) of around £2,500 each.
Eighteen to 30 year olds can apply online at the Start-up Loans Company.
Business Angel Co-Investment Fund
Business angels are entrepreneurial individuals who provide capital to small businesses or start ups, usually in return for a share in the business.
This £50 million fund (provided from the Regional Growth Fund) invests with syndicates of business angels in England who are interested in investing in SMEs in qualifying areas of the country. We launched the fund in November 2011.
Businesses looking for investment should first contact a business angel syndicate or network. You can find out more on the UK Business Angels Association website.
Enterprise Capital Funds programme
This scheme is a public/private programme which provides venture capital investment for early-stage, innovative SMEs with high growth potential. The scheme started in 2006 and we’ve made a further £200 million available.
For many early-stage innovative companies, equity finance is the best option to reach their high growth potential but they can struggle to obtain this form of finance.
This is often because the relatively high costs of undertaking due diligence in relation to the size of the deal mean that investors prefer to invest in later-stage companies. This results in a lack of money for some early-stage companies.
We’ve launched 12 funds since 2006 and invested more than £160 million in companies.
Tax incentives for investment in SMEs
There’s a range of tax incentives available to encourage individual investors to invest in SMEs. These include the new Seed Enterprise Investment Scheme (SEIS). SEIS helps small, early-stage companies raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies.