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Business Growth Fund

Small and medium businesses might be finding it hard to get hold of the funding they need in the current harsh economic climate. However, alongside alternative finance options such as invoice finance and factoring, there are a number of funds that are looking to fill the gap left by the banks.

SME Funding

The Business Growth Fund is one such funding initiative. It was set up a year ago with up to £2.5bn ready to invest, and is backed by the government as well as the banks themselves. The fund itself is independent, but has support from Barclays, RBS and Lloyds. Investments tend to range from £2m to £10m in return for a minority stake in the business and a seat on the board.

With its first investments starting in October last year, it has already made sizeable investments in six companies since the start of this year.   There are aims to make 40 investments per year – funds could add up to £350m annually.

Companies that have already benefited from investment include the Mexican restaurant chain Barburrito, social video advertising site Unruly Media and toy and gadget maker Wow! Stuff. Though this fund does not cater for financial services or property investments, clearly it is open to all sorts of small and medium business opportunities.

The fund is currently in talks with around 44 companies, with the potential for £185m of investment. There’s 73 other firms on its books, any of which could be successful in gaining funding through this fund.

Funding for start-ups?

However – start up businesses need not apply. The fund only caters for more established companies, and tends to refer these new businesses to alternative finance measures such as peer to peer lending, crowd funding and invoice financing.

Invoice finance in particular is backed by the government as a great way to get access to working capital and cash flow for small businesses. Where late payment might be a problem, this means of funding is ideal for those businesses who have orders on their books but are unable to get the payment they need soon enough.


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