British Business Bank doubles maximum potential commitment for new Enterprise Capital Funds to £50m
*** New Enterprise Capital Funds Guidance published, effective immediately ***
*** Investment limit in initial business funding rounds increased to £5m ***
*** Enterprise Capital Funds programme renewed for 10 years to 2024 ***
The British Business Bank has today published new guidelines for its Enterprise Capital Funds (‘ECF’) programme that include a doubling of the maximum potential commitment it can make to new ECFs to £50m. The new provisions, which apply with immediate effect, also mean that new funds will be able to make investments of up to £5m in initial funding rounds of viable businesses they wish to support, as opposed to £2m previously.
Originally launched in 2005, the purpose of the ECF programme is to increase the availability of growth capital to smaller and medium-sized businesses impacted by the so-called ‘equity gap’. This gap has been shown to be a structural market weakness impacting businesses with viable investment propositions needing to raise modest levels of risk capital. These propositions would otherwise be less likely to get support because of the proportionately higher cost of selection and assessment involved compared with larger transactions.
ECFs operate with a commercial focus, with up to two-thirds of a fund’s capacity at first close invested by the British Business Bank programme, and the remainder from private sector investors. Prior to the introduction of these new guidelines, 16 ECFs have been established which in aggregate created a total of over £530m of equity financing capacity, and to date 169 businesses have benefitted from ECF backing.
Ken Cooper, Managing Director for Venture Capital Solutions at the British Business Bank said: “ECFs have played a very important role in bridging the finance gap and improving access to growth capital for early stage businesses in the UK. The new ECF provisions mean that we can continue for the next 10 years to enhance investment capacity at this vitally important stage for growth businesses.”
The new guidance document titled ‘Enterprise Capital Funds: Guidance for Prospective Managers’ runs to 36 pages and is available to view or download from the British Business Bank website at this link.
The British Business Bank’s Venture Capital Solutions team will be hosting a detailed briefing event for prospective fund managers potentially interested in submitting proposals for new ECFs at a venue in London in the next few weeks. The details will be posted on the British Business Bank website in due course.
Joanna Fletcher, Department for Business, Innovation and Skills
020 7215 5951, Joanna.Fletcher@bis.gsi.gov.uk
About the British Business Bank
The British Business Bank’s strategic intent is to ensure that finance markets for small and medium-sized businesses work effectively, allowing them to prosper, grow and build UK economic activity. It is a key element of the Government’s Industrial Strategy, and its programme is already contributing to making the UK the best place in Europe to start, grow and finance a business.
The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. British Business Bank plc will operate as a Government-owned financial institution once HM Government has received European Commission state aid clearance, which is expected in 2014.
Recent performance highlights and developments include:
• £660m of total lending and investment supported in 2013, up 73% versus 2012; approximately half of this was through alternative finance providers.
• 25,000 businesses were benefitting from £1.5bn of lending and investment supported by British Business Bank programmes at the end of 2013.
• 10 commitments to date under the combined Investment Programmes will support over £800m of lending capacity through a range of alternative finance provider models.
• Wholesale Guarantees pilot launched using government-backed portfolio guarantees to incentivise new SME lending by regulated banks.
About Venture Capital Solutions
There is a long-term structural weakness in the provision of equity finance – the so-called ‘equity gap’ – considered to be most severe in investments of up to £5m and across a range of sectors. The British Business Bank is tackling this weakness through solutions to encourage more equity investment in smaller businesses, including Enterprise Capital Funds, the Angel CoFund and the Aspire Fund. The Bank also has solutions aimed at the current shortage of institutional capital for later stage venture capital investment such as the ECF VC Catalyst Fund.
About Enterprise Capital Funds
ECFs are commercially-focused funds, supported by the British Business Bank, that bring together private and public money to make equity investments in high growth businesses. In total there are 16 Enterprise Capital Funds at present, with aggregate investment capacity of over £530m.