The British Business Bank has published new guidelines for its Enterprise Capital Funds (‘ECF’) programme that include a doubling of the maximum potential commitment it can make to new ECFs to £50m. The new provisions, which apply with immediate effect, also mean that new funds will be able to make investments of up to £5m in initial funding rounds of viable businesses they wish to support, as opposed to £2m previously.
Originally launched in 2005, the purpose of the ECF programme is to increase the availability of growth capital to smaller and medium-sized businesses impacted by the so-called ‘equity gap’. This gap has been shown to be a structural market weakness impacting businesses with viable investment propositions needing to raise modest levels of risk capital. These propositions would otherwise be less likely to get support because of the proportionately higher cost of selection and assessment involved compared with larger transactions.
ECFs operate with a commercial focus, with up to two-thirds of a fund’s capacity at first close invested by the British Business Bank programme, and the remainder from private sector investors. Prior to the introduction of these new guidelines, 16 ECFs have been established which in aggregate created a total of over £530m of equity financing capacity, and to date 169 businesses have benefited from ECF backing.
The new guidance document titled ‘Enterprise Capital Funds: Guidance for Prospective Managers’ runs to 36 pages and is available to view or download from the British Business Bank website at this link
