In October 2019, Creative England (CE) launched its £24m scale-up finance fund, Creative Growth Finance. The fund is targeting businesses within the creative industries, a sector that contributed £111.7bn GVA to the UK economy and grew by 7.4% in 2017-18, according to the Department for Digital, Culture, Media & Sport – compared with the country’s overall expansion of 1.4%. A survey by CE found that 75% of SMEs are predicted to grow over the next 12 months. It also revealed that 72% of SMEs in the creative industries suffered from a lack of growth capital. This new fund is the first of its kind to specifically target the creative sector and is backed by ethical lender Triodos Bank.
“The target businesses are post-revenue, IP-rich SMEs that require finance to support further growth. It is not to fund projects,” explains CE’s CEO, Caroline Norbury MBE. “Creative businesses include those involved in film, television, advertising, marketing, music, publishing, design and fashion; companies must be at least two years old, with turnover of no less than £300,000. The aim is to find management teams capable of taking the business to the next level, funded by debt, and not looking to give away large parts of their business too quickly.”
Loans are between £100,000 and £500,000, and repayment in one-to-four years at interest rates of between 7.5% and 15%, depending on the risk profile. The new fund sits alongside several other funds delivered by CE to support start-up companies. In those early funds was a mix of equity, debt and revenue share investments of £25,000 to £250,000. These have achieved loan repayment rates of over 95% since 2014.
The strong repayment record on those early loans and investments was in no small part because CE was far more flexible than traditional lenders – client-centred as opposed to systematic. “This track record proved attractive when we were looking for a bank to partner with us,” says Norbury. “In the end Triodos was chosen because its core principles were in line with the aspirations of our fund.”
Strong support
Triodos Bank is providing £10m to the Creative Growth Finance fund, while CE provides £5m on top of another £9m from its other funds reinvested from returns over the five years. Since 2012, CE had made £20m of investments, with 81% in businesses that are based outside London and the South East.
More than 83% of businesses supported by CE have succeeded past year three, compared to the national average of 60%, says Norbury. And some 45% of CE’s historical finance activity has created jobs in areas with the highest economic need.
As well as providing loan capital, CE will offer support through a regional network of investment and creative industries sector specialists. The fund will be UK-wide, available in the devolved nations as well as in England.
In September 2019, CE and the Creative Industries Federation joined forces to set up a new body to champion the creative sector and provide businesses with practical support. In January 2020, Norbury became CEO at the federation (alongside her role as CEO and founder of CE).
“We co-invest alongside many different entities, and they are often introduced to us through the corporate finance world,” says Norbury. “Working with ICAEW has helped give the process more rigour. We’ve got incredibly strong networks because we’ve been doing this for some time. We’re not based in London and our team is distributed around the UK. It means we have a group of people who send us opportunities, particularly from the corporate finance world, which is hugely important.
“We’re really keen to build as many new relationships and networks as possible, including with the Corporate Finance Faculty,” she adds. “Shaun Beaney’s contribution to the Creative Industries Council’s Investment in Growth working group, which I chair, has been invaluable.”
About the author
Caroline Norbury MBE is CEO of Creative England and the Creative Industries Federation
