The fund will be the largest individual growth capital fund for small to medium sized businesses in the West Midlands.
Managed by Finance Birmingham, a growing provider of growth capital, the fund is expected to help more than 40 businesses and create or safeguard 5,000 jobs across the region over the next five years.
The £56million fund is the result of a groundbreaking public and private sector partnership between the Greater Birmingham & Solihull Local Enterprise Partnership (GBSLEP), the Black Country LEP and the West Midlands Pension Fund. In addition to funding from the Government’s Regional Growth Fund, cash has been added from the two LEPs from their Growing Places allocations.
Businesses will be able to apply for loans of between £250,000 and £2million to fund development and growth plans. Typical investments are expected to be around £1million.
The funds will be given as mezzanine loans – an innovative finance, which sits between traditional debt and equity and avoids part ownership by investors. This type of funding is in short supply in the region and provides a solution for businesses, which need funds quickly or have less security to offer traditional funders, despite performing well. Finance Birmingham’s Mezzanine Fund will run from May 2014 to March 2019.
Finance Birmingham is calling for businesses with ambition and a viable plan for growth to get in touch to talk about how they can help make their plans a reality. All sectors and all uses of funds will be considered.
Sir Albert Bore, Leader of Birmingham City Council, said: “This fund demonstrates how public and private funds can be structured and leveraged to create a dynamic resource for growing businesses across the West Midlands. Our region is home to a growing and diverse range of entrepreneurs who, with the right support and backing, can create jobs and boost the local economy.
“The fund also provides a model for those in other parts of the UK, on how public and private partners can work together to address some of the biggest issues facing business growth – in this case, that is much needed funding.”
With the limited appetite of pension funds for investing in business support schemes, the West Midlands Pension Fund’s backing of the Mezzanine is being seen as a clear sign of confidence in its model and the potential of the region’s SMEs to deliver significant returns and economic growth. The West Midlands Pension Fund will provide 50 per cent of the money invested.