Frequently asked questions

Launched in sequence from 2023 the Nations and Regions Investment Funds (NRIF) have been designed to specifically address gaps in access to finance identified through detailed economic research and analysis. The funds will increase the supply and diversity of early-stage finance for UK smaller businesses, providing funds to firms that might otherwise not receive investment and help to break down barriers in access to finance.

The British Business Bank (the Bank) is responsible for setting up and running the funds on behalf of the UK Government. We are establishing funds in areas not currently served by the Bank’s existing regional funding programme. The funds will have a demonstrable presence across their regions linking up with the existing small business finance ecosystem to increase reach and create an impact beyond the funds, helping to boost productivity, innovation and jobs.

We will initially keep back a proportion of the capital allocated to each fund area as an “Investor Reserve” to be allocated at a later date – this will give flexibility to address economic challenges or unforeseen circumstances if needed.

The tender documentation will set out how and when you are able to raise clarifications against any aspect of the tender, the funds and the broader requirements. As we are running a formal procurement process, this (and the broader procurement) will be entirely managed via the Bank’s procurement portal.

Frequently Asked Questions (FAQs) will be periodically updated and published via the Bank’s procurement portal during the tender development period. As part of the tender evaluation process, the NRIF team may seek clarification from fund managers in respect of their tender.

The purpose of the funds is to drive sustainable economic growth with an inclusive approach for all sectors. The ESG requirements for tenderers will set out how this criteria will be assessed. The fund reporting requirements will include data points on both SME and fund manager emissions as well as diversity and inclusion.

London is excluded from SEIF to ensure that resources are directed toward Nations and Regions with the most pronounced access to finance gaps. As the UK’s financial centre, London receives a disproportionate share of equity investment, over 50% of all UK VC funding, despite representing a much smaller share of the business population. By focusing on areas outside London, the Nations and Regions Investment Funds aim to correct geographic disparities in access to and supply of finance and stimulate growth in overlooked but high-potential clusters across the UK.

All contracted fund managers will be set targets to crowd in additional third party private sector capital alongside the new NRIF capital, including from traditional lenders.

Yes, but they should demonstrate consideration of the potential issues from operating as a consortium model including a stable and effective structure and show that it meets the requirements set out in the tender documentation. We will expect one firm to take lead responsibility for delivering against the contract and the tender will need to set out clearly which entity will be the authorised manager. We will only be awarding one contract to deliver the entire initial commitment for each product type in each fund area.

We are open to fund managers tendering for multiple funds, but we would need to fully understand how an appropriate focus on the deployment of each fund across the relevant geography will be managed. Our preference would be for distinct investment teams on each sub-fund. The tender will be split into separate ’lots’, each representing a sub-fund, and each lot being separately evaluated. Each lot will be assessed on its merits. Economies of scale will need to be balanced against the specialisms you will need in each management team.

Yes, we would accept consortium bids/joint tenders. The precise details around any restrictions regarding individual and joint tenders will be set out within the tender documents.

The Bank will be managing the entire procurement via its procurement portal. All interested fund managers will be notified when we launch the procurement. We will ensure that fund managers have the necessary links to access the portal and we will ensure the wider finance community is aware that the procurement has launched. All the instructions around how to submit a tender, key dates and what to include with a completed tender will be set out in the tender documentation.

In the meantime, fund managers intending to submit a tender should register their details on the Central Digital Platform. This platform will allow you to provide us with certain organisational information.

The tender documentation will be structured with specific questionnaires and associated templates for fund managers to complete and respond to the different areas that are to be assessed. Certain questions will be accompanied with word limits.

Fund managers will be expected to make a meaningful manager or General Partner (GP) commitment into the fund and will have to demonstrate how this commitment will be made. Fund managers are not expected to bring external private capital at fund level but will need to demonstrate how they will bring private co-investment into deals and as part of follow-on investments.

Broker fees that lead to successful investments may form part of the investment cost. If broker fees form part of the deal sourcing strategy, these should be treated as a fund manager cost. The tender should set out how finance brokers will play a role and explain how fees will be kept to a minimum.

SMEs will be able to apply to the funds as soon as they launch, which we anticipate will be in Summer 2026.

All fund managers will operate under the same investment and operational guidelines, but commercial investment decision making will be fully delegated to contracted fund managers.

A management fee or General Partner Share (GPS) will be paid to cover the management of the fund. The fee level given in the tender should be enough to properly operate the fund but not be excessive. Fund managers are required to submit a management fee with a set percentage on drawn capital and a lower percentage on undrawn capital during the investment period with a percentage stepdown each year through the post-investment period (based on the previous year’s fee level). The fee structures will be scored as part of the assessment of tenders along with any proposed carried interest and manager/GP commitment. The fee structures should be for the 10-year fund life to demonstrate that the income is sufficient to cover the costs of managing the fund. These projections should include assumptions on inflation etc. The fee structure will be sub-fund specific (i.e. the level/value of fees could be different if tendering for multiple Lots)

All funds will be structured as 10 year life funds with a five year investment period. There will be an option to extend the fund life by two one-year periods.

We would expect to see some physical presence in the fund area and fund managers will have to demonstrate how they will engage and work across the entire area.

All commercial investment decision making, including their approach to carrying out due diligence will be assessed as part of the tender and once the funds are operational, will be fully delegated to contracted fund managers.

The funds will have limits and targets around investment sizes and stage. EIS and VCT rules do not apply to the funds but fund managers who also operate these funds will need to be mindful of EIS/VCT rules and limits when considering co-investing alongside the fund.

The funds will need to comply with the applicable UK Subsidy Control rules as set out under the Subsidy Control Act 2022. EU State aid rules may continue to apply in relation to the funding of businesses falling within the scope of the Northern Ireland Protocol.

The UK Subsidy Control rules are a more permissive framework and therefore strict age restrictions do not apply. However, fund managers will be required to comply with the investment limits and incentive regime including targeting a proportion of deployment towards lower value loans or equity investment for start-up or early-stage companies, to ensure that the funds are targeting the identified funding gap.

A Stakeholder Advisory Board will be set up in each fund area, with the purpose of providing support and advice to the Bank in the delivery of the funds, and to promote and raise awareness of the fund within their small business finance communities. The Board will be the formal mechanism for engagement with strategic stakeholders within the fund geography. The Board is advisory and will consider and provide expertise and insight on access to finance issues for smaller businesses in the relevant fund geography.

Yes, fund managers will need to cover the whole region, irrespective as to the sub-fund type. Fund managers will be incentivised to invest at least a proportion of the fund into specific sub-geographical areas and should therefore demonstrate how they intend to source deal flow across the whole fund area.

The debt funds can in some instances support acquisitions where this forms part of a growth story.

Fund managers will be expected to make commercially appropriate decisions when considering investment structures and terms. These, along with the investment decision process for both initial and follow-on investments, should be outlined in their tender response. Tranched investments will ordinarily be treated as an initial investment, but an explanation should be provided of when tranched investments will be considered and why tranching is considered appropriate. The total amount of capital that can be drawn down after the investment period will be limited to 30% of the fund for the equity funds and 10% for the debt funds.

Leveraging in private capital will be encouraged and so co-investment at deal level will be allowed. Investing alongside the Bank’s existing regional funds or other funds operating in the fund area will be allowed although this can only be counted towards the private leverage target where those funds comprise capital from private investors. Where co-investment is proposed from another fund operated by the fund manager, proper consideration should be made of potential conflicts. There is a requirement to provide details of how any conflict of interest would be managed, and an allocation policy as part of the tender submission. Fund managers cannot bring external private capital at fund level.

The funds are expected to have an inclusive approach to all eligible sectors. The fund investment strategies will be designed to be flexible, so that the fund managers can find the high growth potential businesses to invest in, across a broad range of sectors.

The funds will need to comply with the applicable UK Subsidy Control rules as set out under the Subsidy Control Act 2022.

In addition, the funds will not be able to invest in companies whose activities contravene the law or accepted standards or moral or ethical behaviour, or in businesses or sectors that could be reasonably expected to cause embarrassment to the Bank as an entity owned by UK Government.

Indicative targets will be set to encourage a spread of activity across agreed investment stages. We would anticipate fund managers targeting at least a proportion of their total commitments towards lower value loans (for the Debt and Smaller Loans funds) or investments for start-up or early-stage companies (for the Equity Funds). A proportion of the manager’s fee will be withheld until the target is achieved.

There will be three targets for GPS release which are all weighted equally and a third of the GPS retention will be released for each target being met.

There is no fixed time period but there is a limit on the total amount that can be invested within 6 months of the initial investment (the total cannot exceed £5m from all investors except those only providing debt finance). If a fund manager regularly undertakes follow-on investments within a short period after the initial investment, this may be challenged as part of the quarterly review process.

The fund investment strategies have been designed to address funding gaps in each fund area and so investments outside of the agreed parameters will only be allowed by exception and where it can be clearly demonstrated that the investment meets the objectives of the NRIF programme and is in the best interests of the fund. The fund manager will be expected to submit a request for approval by the Bank in each case and decisions will be taken on a case-by-case basis with no approval setting a precedent for future requests.

All contracted fund managers will be set targets for levels of private sector co-investment and leverage. We will not be mandating any match-funding requirements and cannot comment on the match funding requirements of other programmes.

The fund investment strategies will be designed to be flexible, so that the fund managers can find the high growth potential businesses to invest in, across a broad range of sectors. Significant economic analysis has been undertaken in the creation of the funds which highlights that there are businesses in each of the fund areas that have been unable to access loans and equity investment. Fund managers will be incentivised to invest at least a proportion of the fund into specific sub-geographical areas and should therefore demonstrate how they intend to source deal flow across the whole fund area. Appointed fund managers will be expected to market the availability of funds and build suitable deal flow.

The template LPA will include details of any exclusions that would classify an SME as new external finance

The investment strategy has been designed to address funding gaps in the fund area and the investment limits aim to strike a balance between ensuring the funds are providing additional finance and encouraging private leverage. It is envisaged that the fund will typically be the majority participant in first investments but other structures would be allowed (for example, a minority participation that unlocks the whole round would be acceptable). The template LPA includes all investment limits.

Loan terms should be set by the fund manager to reflect the circumstances and risk profile of the individual loan, and indicative terms will need to be included in the tender response submitted by fund managers. These funds are designed to address imbalances in access to finance so loans would be expected to be made to businesses that have been unable to access finance through existing market sources and terms should reflect this. Personal guarantees, warranties and non-standard loan features will be allowed where commercially appropriate. Fund managers should explain in their tender response their expected investment structures, terms and approach to pricing.

As the EIS/SEIS schemes are designed to give tax incentives to individuals to encourage investment into early-stage, higher risk businesses and both schemes have specific parameters around deployment, they will not be treated as institutional equity capital.

We would not expect to see hard evidence of a decline. The funds are addressing gaps in the provision of finance and so lending terms will reflect the likely higher risk profile of funding recipients. Fund managers should be mindful of this and, if they believe that a business could access mainstream finance, then we would expect them to have discussed the options with the business before an investment is made.

Debt funds will be allowed to follow-on. The total amount of capital that can be drawn down after the investment period will be limited to 10% of the fund for the debt funds. Fund managers will not be permitted to recycle funds.

The debt funds will have the flexibility to use non-standard terms where commercially appropriate to do so but will not be allowed to use products that might lead to the fund holding an equity stake.. The equity funds would be allowed to use instruments where the return is principally intended to be an equity return.

The LPA will have a clause that requires all investment opportunities received by the fund manager or its associates that fall within the investment strategy of the fund to be offered to the fund first. There will need to be a defined conflicts of interest process and allocation policies which will need to be submitted as part of the tender submission.