BGF, the state-backed investment fund for scale-ups, is priming its long-talked-about £15bn National Recovery Fund to invest in mid-sized businesses.
The National Recovery Fund, which could launch before Christmas, would target Britain’s 20,000 mid-sized businesses, taking equity stakes of up to £10m.
The National Recovery Fund is needed, BGF believes, to support viable businesses struggling because of the coronavirus pandemic.
Once things return to normal, over-leveraged companies which have borrowed from the Coronavirus Business Interruption Loan Scheme (CBILS), will be hobbled by having to repay debt. These distressed firms will be forced to lay off staff, sell assets, reduce investment, and shrink their businesses as they become reluctant to raise new capital.
The situation will get even more urgent once larger firms have to start paying interest on CBILS loans from next March.
Stephen Welton, chief executive of the Business Growth Fund, told the Telegraph he was now in “meaningful discussions” with a “significant range of institutions” such as pension funds and insurers about them taking part in the £15bn fund.
Mr Welton has long argued that City institutions need to diversify their portfolios to take advantage of Britain’s high-growth tech sector, for example.
Mr Welton said: “My strong sense remains that we need to be bringing all these conversations to a conclusion before Christmas, because whatever happens the economy is getting weaker and weaker and therefore the longer we wait, the more difficult it will be to recover. These businesses can run on empty for three to six months, but they can’t keep doing that.”