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Regional funding: time to show them the money

4 March 2020: regional debt funding is set to help small businesses reach their potential and plug gaps for others when larger lenders won’t say yes. But how does this affect businesses and their accountants? Chris Warmoll reports.

Small businesses are set for a £40m regional funding tranche that has been created to help inject growth into the sector. The Midlands Engine Investment Fund (MEIF) has appointed The FSE Group to manage the fund and invest from £100,000 up to £1.5m in the region’s small business community.
 
The injection is the latest phase of MEIF-released investment and brings the number of MEIF funds to eight. MEIF is delivered by British Business Bank – a government owned development bank that aims to make finance markets more responsive to the small and growing business community and help boost UK economic activity.
 
Robert Spencer, Executive Chairman of The FSE Group, which has five regional offices, overseeing eight different funds with some £192m available to help develop smaller SMEs. 
The group is currently investing around £1m a month. “We look for companies with good management and a good story,” says Spencer. “As one of the biggest providers of gap funding for people and business that can’t get funding from banks, perhaps because their activity is loss-making, we step in to help. 
 
Nowadays, bank lending decisions are largely computerised. However, it is the alternative sources – often regionally-based funding streams, allied with the lender’s management expertise – that are helping to plug the gap and help UK SMEs thrive.
 
Spencer is a former ICAEW South East regional strategy board member who used to head up the South East England Development Agency’s (SEEDA) finance company. He believes regional funds are an excellent tool to help accountants grow their clients’ businesses.
 
The biggest problem companies face is gaining access to finance, says Spencer.
By operating a bit like an old fashioned bank manager, good lenders listen, advise and step in when appropriate, such as when a company’s biggest customer goes bust or by helping to find a non-executive director for the board. 
 
The British Business Bank also boasts two other regional funds targeting businesses in Cornwall and the Isles of Scilly, and those in its ‘Northern Powerhouse’ zone. Since its launch in 2014, the bank has released some £78m in funding to over 91,000 small businesses nationwide. 
 
The funding, generated through the EU’s European Regional Development Fund, part of the European Structural and Investment Funds Growth Programme for 2014-2020, will continue until the end of 2023 despite Brexit.
 
Among its recent Midlands success stories are Leicester-based health and technology firm Navitas Digital Safety Ltd (Navitas) which secured £745,000 in equity investment. The funding is set to empower roll out of its automated health and safety technology to food and hospitality outlets across the country and bring its manufacturing in-house.
 
Another recipient of MEIF funding is Warwickshire-based Oneskee, a snow sports apparel brand, which secured a six-figure investment. Founded in 2014 by brothers Josh and Scott Clifford, Oneskee products are now available online in 54 countries. The latest funding round will support the firm’s in developing new sales channels across Europe and America.
 
ICAEW is one of a number of business and finance organisations that helped contribute to and create the Business Finance Guide which impartially sets out the full range of financing options available to businesses at all stages of their growth from start-ups right up to growing mid-sized companies. And depending on where businesses are located, there are many more funding and grant options available.
 
The Department for Business, Energy and Industrial Strategy, has around 170 separate schemes peppered throughout the country via its business finance support finder. They range from the Biorenewables Development Centre in Yorkshire to the South East Creatives, a business development and grant programme supporting freelancers and sole traders, start-up and growing businesses working in Essex, East Sussex or Kent.
 
Additionally there are 38 Local Enterprise Partnerships (LEPs) across England, while those in Scotland can target Scottish Enterprise and the Scottish Government’s Funding Opportunities resources.
 
Similar pools of expertise and funding pipelines are available in Wales through the Business Wales’ finance locator and in Northern Ireland via its NISPO II’s Proof of Concept grant – aimed at pre-launch start-ups, and Invest NI grants for more established companies.
 
But is the faith that alternative lending places in companies ever rewarded? Spencer recently received a letter from someone who when FSE invested in his protein drinks company, was losing £300,000 a year but now turns over £11m at a cool £1m profit.
 
Many fans of regional funding – both old and new – will likely drink to that!