The Future London Growth Fund will lend 1 million to 3 million pounds a time, in a city where fewer owners report a profit than elsewhere.
LONDON, England (Biz House) – London enjoys telling the world it is the best place to start a business, and a new 70 million pound loan fund suggests the capital knows the sales pitch has a gap in it. The Future London Growth Fund is designed for ambitious firms that are too big for a high street overdraft and too awkward for a venture debt deal, a squeezed middle that anyone who has tried to raise growth money in the City will recognise.
What the fund is, and who is behind it
According to City AM’s report on the launch, the fund totals 70 million pounds and is managed by the investment firm FSE Group, which oversees almost 460 million pounds and has backed more than 1,000 growing businesses. It will make loans of 1 million to 3 million pounds to companies across London’s 32 boroughs and the City of London.
The backers are public. The British Business Bank is putting in 20 million pounds as a cornerstone commitment, and Funding London, the Mayor’s investment arm, is also a cornerstone investor. Tech.eu’s write-up adds that the Mayor’s money comes through GLIF Limited as part of the London Growth Plan. The launch was announced on a Thursday in late October, ahead of the Budget.
The gap between the bank and the venture fund
The target is firms in the gap between conventional bank lending and larger venture debt, including promising businesses that are not yet profitable. Tech Funding News says the fund aims to back 40 to 50 businesses and to recycle repaid capital into new loans, with sectors ranging from healthcare and education to data, enterprise software, advanced manufacturing and sustainable technology. In its coverage on Tech Funding News, the fund’s head, Kala Desai, said some firms are “excluded by traditional lenders before any conversation has taken place”.
Adam Kelly of the British Business Bank made a related point: smaller businesses in underserved communities can still struggle to secure the growth capital they need. This is not FSE’s first outing in the capital: Tech.eu says it has run the debt side of Funding London’s Greater London Investment Fund since 2019, including a 66 million pound debt portion. Put plainly, a lender’s spreadsheet often has no box for a company that is growing fast, losing money and perfectly sensible.
The London paradox in two percentages
The numbers behind the launch are less flattering than the slogan. A British Business Bank report found London the toughest place in the UK to be an entrepreneur, with 71 percent of London business owners reporting a profit against 84 percent nationally. That sits oddly beside the Mayor’s line, quoted by City AM, that “London is the best city in the world to start and grow a business”. Both can hold: a city can be the best place to have an idea and an expensive one in which to keep a company alive.
Also from BritBrief’s account of the launch: founders have warned that funding shortfalls are pushing promising firms to expand abroad, and business leaders were seeking stronger investment incentives from the Autumn Budget. It also noted that major UK pension providers had earlier pledged to explore a Scale-Up Fund of more than 1 billion pounds for fast-growing science and technology firms. That is a separate effort and it is not yet a done deal.
Reading the small print
A few sober observations. First, this is debt, not a grant: every pound has to be repaid with interest, so it suits firms with revenue and a plausible path to paying it back. Second, the scale is modest. Dividing 70 million pounds by the 40 to 50 firms the fund hopes to back gives something like 1.4 to 1.75 million pounds each, which fits the stated loan range and is modest for a city with a business population as large as London’s. Note, too, that the target is firms with strong commercial traction, usually shown through revenue, so a pre-revenue idea sketched on a napkin is not the brief. Third, so far we have a launch and no results, so judging whether the fund works will have to wait for the loans.
It would also be wrong to pretend one fund fixes London’s funding problem. What it does is test whether public and private money together can serve the awkward middle. If it works, the model could be copied; if it does not, we will have a tidy case study in why.
For readers who want a lighter London
I write for The London Prat, and there is more of my London business reporting on the site. For a break from term sheets, try Britain’s answer to the Onion or the London humor news section. If you ever need to tell a funding announcement from a joke, a handy guide covers how to spot a joke in the news. Readers with a taste for American comedy can try Bohiney Magazine. The reporting above is straight, however.
Judged purely as a gesture, a 70 million pound loan fund is a sensible one: it spends public money where banks will not, and it puts a face on a gap that founders have complained about for years. Whether it turns out to be a bridge or a very nicely designed signpost is something the next few years of loans will show.
SOURCE: https://bohiney.com/