British Business Bank launches Midlands Engine Investment Fund

We wrote recently about the British Business Bank’s Help to Grow Programme, which delivers funds for high growth potential businesses. Part of the way in which this programme will be delivered is through regional investment funds.

There are currently two such funds – the Northern Powerhouse Investment Fund and the Midlands Engine Investment Fund. These funds will be made available to business through 90 partners, the purpose of which is to increase the £3.2 billion, which is already funding over 51,000 businesses.

A Midlands Engine Investment Fund of more than £250 million is being made available, which brings together funding from the European Regional Development Fund (ERDF), the European Investment bank (EIB), the British Business Bank (BBB) and other legacy funding into a single ‘fund-of-funds’ structure. 

The funds are being procured to provide equity, debt, small business loans and early stage, proof-of-concept funds for high growth potential businesses in the Midlands. The BBB has worked with Local Enterprise Partnerships (LEPs) to implement an investment and procurement strategy which is consistent with market assessments and delivers value for money.

Unique to the Midlands Engine area, this fund-of-funds is a balance between economic benefits and financial returns; repaying EIB and BBB loans but also generating legacy.

With the Midland Engine Investment Fund (MEIF) approach, the British Business Bank is seeking to create sustainable economic activity through supporting new and growing businesses across the 10 LEPs that make up the MEIF area.

The bank wants to have a demonstrable presence across the MEIF area, linking up the finance community to increase reach and create an impact beyond the fund itself. It also wants to promote wider British Business Bank initiatives and other sources of funding available to SMEs and inform companies about how they can access these funds.

The MEIF will be made of four sub-funds. These are:

  • Lot 1 Equity – Investments up to £2 million. There will be an initial allocation of around £80 million to this lot with at least 20 per cent by value in amounts of under £250,000 and at least 70 per cent in amounts of under £750,000. With a minimum individual fund size of £30 million, Lot 1 is typically for early stage equity funding for start-ups with high growth potential or for existing businesses with ambitious plans. Example deals include growth capital, working capital, capital expenditure or relocation.
  • Lot 2 Debt – Loans from £100,000 up to £1.5 million. There will be an initial allocation of in the region of £120 million to this lot, at least 25 per cent by value of which will be in amounts of under £200,000 and at least 70 per cent in amounts of under £500,000. With a minimum individual fund size of £30 million, this lot is for loan funding; primarily for existing businesses that can demonstrate serviceability and growth potential. Example deals include working capital, hiring a new team, purchasing new machinery or moving to larger premises.
  • Lot 3 Small Business Loans – Loans from £25,000 up to £150,000. There will be an initial allocation of around £30 million to this lot. At least 25 per cent by value will be in amounts of under £50,000 and at least 70 per cent will be in amounts of under £75,000. With a minimum individual fund size of £10 million, the fund will provide loan funding for small businesses that can demonstrate serviceability and growth potential. These will be primarily start-ups or early stage businesses with limited asset base or track record. Example deals include working capital, expansion projects, lease or asset acquisitions.
  • Lot 4 Proof-of-Concept – Investments up to £750,000. There will be an initial allocation of around £20 million to this lot and at least 50 per cent by value will be in amounts of under £250,000. The total individual fund size will be a minimum of £10 million. Typically, this lot of funding is aimed at delivering very early stage equity funding; primarily for start-up or early stage businesses with a focus on innovation, R & D and technology.

The British Business Bank has already identified a few barriers to SMEs accessing these funds, which include a grant dependency culture, lack of awareness or understanding of different types of finance and little or no investment readiness support.

With significant experience in supporting SMEs to find and access growth finance, Pegasus Funding Resources can help you maximise this opportunity.

If you are either a higher-value start-up or are a rapidly growing business in the Midlands region, which needs access to capital to fund that growth, Pegasus can provide a support mechanism that could help you to access to this new source of funding for your business.

For more information call Richard Olsen on 0203 3270567.

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