Banks must do more to match venture capital money from the North West Fund, according to the chief executive of the fund manager North West Business Finance, Andy Leach.
In its first nine months in operation, the North West Fund attracted £8.6m of match funding from the private sector, to support its £6.3m investment into 35 North West businesses.
The North West Fund is jointly financed by the European Regional Development Fund and the European Investment Bank, so comes with ERDF funding already matched. ERDF can only be spent where there is a match. Consequently, whilst there is no requirement for a mandatory match of the North West Fund's investment, every £1 invested to date has attracted, on average, £1.37 of additional private sector investment.
So-called business 'angels' buoyed the businesses supported by The North West Fund with £3.9m of debt and equity funding, while other funds, including Business Finance Solutions, Carbon Trust Investments and the Rising Stars Growth Fund, contributed £2.3m. The banking sector, on the other hand, was the source of just £1.7m. The remainder of private funding originated from alternative funding sources, including invoice financiers and other asset-based lenders.
Andy Leach, chief executive of NWBF, the private, not-for-profit company established to oversee the delivery of the North West Fund, said: "The level of support that we have received from North West businesses and private sector funders has, to date, exceeded our expectations. It is areal pleasure to partner with private organisations and entrepreneurial businesspeople to help realise the ambitions of businesses in the North West and ensure that our funding is exploited to its full potential.
"Since the onset of the recession, business angels have played an increasingly important role in filling the funding gap for small and medium sized businesses and can also, working alongside our fund managers, provide valuable expertise to the companies that they invest in.
During the nine-month period, The North West Fund received 1,392 applications for over £435m of funding from businesses based in or relocating to the North West of England.
"Support for The North West Fund from the region's banks is definitely gathering momentum but could, undoubtedly, be improved. The North West Fund provides the banks with a great opportunity to support their existing customer bases and demonstrate that they are lending to SMEs.
"Of the 35 businesses we have backed to date, we have supported 19 without any private sector match funding whilst, in the cases of the other 16, our £4m has attracted £8.6m. This serves to demonstrate the great flexibility of The North West Fund – on one hand, we can be the sole funder of businesses that otherwise wouldn't be funded, often giving them the chance to quickly seize an opportunity as they strive for first mover advantage. On the other hand, for more mature businesses, we can also provide the final piece in a funding 'jigsaw' that may have taken several months to put together."
The North West Fund is a £185m evergreen investment fund established to provide debt and equity funding, from £50,000 to £2m, to small and medium sized enterprises based in, or relocating to, the North West of England. The Fund addresses an identified gap in the lending, venture capital and private equity markets.