FDC launches £81.5m fund to boost growth for regional SMEs
Frontier Development Capital (FDC) has launched a new £81.5m fund to support the growth of regional SMEs and help them improve sustainability.
The debt funding specialist, which is part of Mercia Asset Management, has created the Evolution fund, which will focus in particular on businesses in the Midlands and the North of England.
It’s backed by £80m in commitments from West Midlands Pension Fund (WMPF) and the British Business Bank, each committing £40m. It will provide flexible debt solutions of £1m to £8m to established SMEs in any sector with proven business performance, growth potential and a strong management team.
The funding can be used to support transactions including management buyouts, acquisitions, shareholder reorganisations and debt refinancing, provide growth capital or help firms to embed sustainability practices and work towards achieving carbon net zero.
FDC, which is based in Birmingham with offices across the UK, has invested over £200m since its inception in 2016. The Evolution Fund is the second FDC fund to be backed by the British Business Bank and the third to be supported by the West Midlands Pension Fund.
The eight-year fund aims to fill a gap in the market for business loans of under £10m for smaller firms. It offers ‘bullet terms’, with the bulk of the capital repaid at the end, which minimises the drain on a company’s cashflow.
Shiventa Sivanesan, assistant director – investment management and stewardship at the West Midlands Pension Fund said: “We’re excited to build on our existing partnership with FDC and British Business Bank as part of our long-term commitment to support regional SMEs. Our investment is expected to deliver competitive returns aligned with our responsible investment values, allowing us to serve the interests of our members.
“Businesses are operating in an uncertain and challenging environment and by improving their access to funding we can enable them to grow and fulfil their potential. We hope other investors will follow our lead and help to scale up the support SMEs need to grow and thrive.”
Adam Kelly, managing director and co-head of funds at the British Business Bank said: “We are pleased to continue our support for FDC, having previously backed the FDC Debt Fund in 2020. The British Business Bank is committed to increasing the supply and diversity of finance for smaller businesses. By backing experienced fund managers like FDC, we help improve access to finance for ambitious companies across the UK’s Nations and regions.”
Graham Mold, head of growth capital at FDC said: “Despite the variety of debt providers in the market, it is still difficult for smaller firms to secure capital as many funders are unwilling to lend sums of under £10m or to support transactions involving SMEs.
“The Evolution Fund reinforces FDC’s commitment to regional businesses often underserved by traditional lenders. As no two deals are the same, it is also designed to meet the need for tailored SME funding. Our team’s ability to assess risk, structure investments and support resilient businesses makes FDC a valued funding partner.”
CMS Cameron McKenna Nabarro Olswang LLP provide legal advice to FDC on the fundraising and legal structuring process.
