Officials said they were now inviting proposals from potential fund managers to operate the new fund. They expect to appoint the managers in the spring ahead of a summer launch.
The Investment Fund for Scotland is one of a series of nations and regions investment funds being introduced by the British Business Bank which will deliver a £1.6 billion commitment of new funding to smaller firms across the UK. The new fund will offer a range of commercial finance options with loans of between £25,000 and £2m and equity investment of up to £5m.
The bank said that by increasing the supply and diversity of early-stage finance for smaller businesses, it aims to tackle an “identified funding gap”. Similar funds are planned for Wales, Northern Ireland and the south west of England, along with follow-on funds for the Midlands and the north of England.
It follows the success of the regional investment funds already being delivered by the British Business Bank through the Northern Powerhouse Investment Fund (NPIF), Midlands Engine Investment Fund (MEIF), Growth Finance Fund (NI) and Cornwall and the Isles of Scilly Investment Fund (CIoSIF). Since the existing investment funds launched, the bank has invested some £605m into the areas covered by those four funds, crowding in more than £825m in additional private sector co-investment and supporting around 1,650 smaller businesses.
Ken Cooper, managing director, venture solutions at the British Business Bank, said: “The new Investment Fund for Scotland builds on the success of the bank’s existing regional funds and is designed to increase the supply and diversity of finance available to smaller businesses in Scotland. Our aim is to reduce imbalances and break down barriers that small firms may face in accessing finance, creating a more level playing field. Given the geographical spread of Scotland’s smaller business population, connecting with entrepreneurs in some of the more rural and hard-to-reach areas will be an important focus of the fund.
“While we have seen an encouraging stream of equity deals into Scottish firms over the past couple of years, the overall levels of equity investment and also private debt lending remain much lower than Scotland’s share of the UK’s small business population. We’ll be working closely with the local small business finance ecosystem to ensure the fund provides support to innovative, ambitious business owners across the country.”
The Investment Fund for Scotland will operate across three tiers: smaller loans (£25k-£100k), debt (£100k-£2m) and equity (up to £5m).The British Business Bank, which is structured as a public limited company and is owned by the Department for Business, Energy and Industrial Strategy, is responsible for administering the nations and regions investment funds on behalf of the UK government. It said it was establishing investment funds in areas not currently served by the bank’s existing regional funding programme before launching follow-on investment funds in existing fund areas.