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Enterprise Capital Funds

Enterprise Capital Funds

Enterprise Capital Funds are financial schemes established by the Department for Business, Innovation and Skills (BIS) in the United Kingdom to address a market weakness in the provision of equity finance to UK small and medium enterprises (SMEs).

British Business Finance Limited invests into funds on terms that improve the outcome for private sector investors when those funds are successful. It does this by taking an agreed prioritised return of 3–4.5% which is paid regardless of a fund’s performance. This investment ‘encourages venture capital funds to operate in a part of the market where smaller businesses are not able to access the growth capital they need.’

The ECF was first announced in the 2010 Budget. It was aimed at SMEs with high growth potential and provided £37.5 million in equity finance; £25 million from government and £12 million from private coinvestors. In October 2013 the operations and staff of the delivery agency for the ECF finances were transferred to the British Business Bank.

In the Autumn Statement 2014 the ECF received an additional £400 million in funding to expand the programme. The FSB welcomed this, saying that it would provide much needed cash for small businesses. A 2009 National Audit Office report into venture capital support for small businesses found that businesses in receipt of ECF money reported high levels of satisfaction with them. 90% of recipients would recommend the fund to others.

In 2015 the British Business Bank had a capital commitment to the ECF of £195 million. In February 2016, it stated that it had invested over £295 million across more than 225 companies. Businesses wishing to apply for equity funding under this scheme should approach the fund managers. This can be done through the British Business Bank homepage. The website also has guidance about the investment process and seminars for prospective fund managers.

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