The British Business Bank, the UK government’s economic development bank, has committed £50m to a new fund that aims to help scale founder-owned, small and mid-sized businesses.
Soho Square Partnership Capital Fund II will target established companies that are looking to make acquisitions, technology investments or undergoing succession events and are active in key growth sectors identified by the government’s industrial strategy, focusing on digital and technology, and professional and business services.
The fund will provide loans to companies with EBITDA of up to £15m and turnover of up to £200m, with at least 75 per cent of the fund invested in the UK.
“This commitment backs dynamic SMEs in key sectors, helping them scale, create jobs and drive growth, to raise living standards across the UK,” said Blair McDougall, minister for small business and economic transformation.
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Soho Square, a UK-based partnership capital firm, will also offer advice to investee companies and provide support typically found in private equity teams.
Since traditional bank lending is often insufficiently flexible for SMEs and traditional private equity often requires significantly diluting ownership or the sale of the business, Soho Square has set out to provide business owners with the capital to allow them to scale and stay in the UK.
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“The bank’s backing lets us do more of what we set out to do: give founder-owned businesses the institutional capital they need, on terms that let them stay in control and keep building,” said Walid Fakhry, co-managing partner at Soho Square Capital. “That is what our partnership capital is about, and having the bank behind it means more high-quality UK businesses can take their next step without giving up the reins.”
“This commitment is directly addressing a gap in the debt market,” added Adam Kelly, managing director and co-head of funds at the British Business Bank. “It will unlock flexible capital solutions for established businesses with strong growth potential, an area currently underserved by other lenders.”
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The British Business Bank is joined by several US institutional investors in Soho Square’s fund, and as a cornerstone investor, will have the opportunity to participate in co-investments alongside the fund.
