British Business Bank raises £400m for Northern UK fund

The bank, together with European partners, has secured funding and appointed managers to oversee a Northern-UK focused debt and equity fund.

The British Business Bank, together with the UK government and two European bodies, has raised £400 million for the Northern Powerhouse Investment Fund. The offering is a debt and equity fund aiming to provide financing to businesses in the North of the UK.

The fund has been established due to research from the BBB showing there’s a gap in financing requirements in the region. “The further away you move from London and the South East, the more difficult it gets to find financing,” Grant Peggie, director of venture capital solutions at the BBB, told PDI.

The £400 million raised consists of a £50 million loan from the BBB as well as a £180 million loan from the European Investment Bank. The fund has also received £114 million in grant financing from the European Regional Development Fund as well as grant financing of more than £50 million from the UK government, Peggie said.

The fund will provide microfinance as well as business loans between £100,000 and £750,000 to businesses in the Northern region. It will also be able to provide equity funding up to £2 million. It will work with 10 local enterprise partnerships in the region to help provide businesses in need with financing.

The microfinancing portion of the offering will be managed by Business Finance Solution, MSIF, Finance for Enterprise and Business Enterprise Finance. The loans portion of the fund will be managed by FW Capital and Enterprise Ventures while the equity financing portion will be overseen by Maven Capital Partners and Enterprise Ventures.

Peggie said it was important all of the fund managers had a presence in the North of the UK and knowledge of the region. He declined to go into specifics about the fees being paid to the managers, but did say being competitive in fee structures formed part of the mandate-winning process.

In addition to the £400 million already raised, Peggie said the managers would be charged with raising their own capital to fund deals. “We are tasking the fund managers to source private capital on a deal-by-deal basis,” he said. Managers will be asked to raise roughly another £400 million, he added.

The introduction of this fund is not the first recent show of support for alternative funding the BBB has gotten behind. In January, for example, the bank injected £40 million into marketplace lender Funding Circle.

Peggie said the goal is to provide diverse options for SMEs to source financing. “We think it’s great that SMEs have choice,” he said, though noted it’s still the case that 84 percent of small and medium sized businesses will go to regional banks as their first port of call for financing needs.