Today, the British Business Bank has announced a cornerstone commitment of £50m to Soho Square Partnership Capital Fund II to help established small and mid-sized businesses looking to grow further. The Bank is joined by several US institutional investors in the fund.
Headquartered in London, Soho Square Capital is a lower mid-market focused investment firm that provides structured capital solutions to support UK based, founder-owned businesses during periods of transition including adopting new technology, scaling or making an acquisition.
Soho Square will offer businesses an alternative route to funding through a primarily debt instrument, whilst still providing strategic advice and support typically found in private equity teams. It also provides partnership capital to support the growth of portfolio companies.
Fund II will target established companies in the government’s Industrial Strategy’s key growth sectors, with a preference for those in digital and technology, and professional and business services, looking to expand, or undergoing succession events.
Traditional Bank lending is often insufficiently flexible for these purposes and traditional private equity often requires significantly diluting ownership or the sale of the business. Structured capital solutions combine downside protection via senior secured credit instruments with the potential for equity upside through much smaller or minority equity positions.
Soho Square will provide loans to established companies, typically with EBITDA of up to £15m and turnover of up to £200m. At least 75% of the fund will be invested in the UK, with a particular focus on businesses across the UK’s Nations and regions. The Fund will seek to address the structural gap in the availability of capital to smaller companies in the UK and will provide business owners with the capital to allow them to scale their companies and stay in the UK.
The British Business Bank makes cornerstone commitments to mobilise further institutional capital by providing a signal of confidence in the fund. The Bank has also committed capital within its Five-year Strategic Plan to prioritise deployment to the eight Industrial Strategy sectors. As a cornerstone investor, the Bank will have the opportunity to participate in co-investments alongside the fund.
“This commitment is directly addressing a gap in the debt market. It will unlock flexible capital solutions for established businesses with strong growth potential, an area currently underserved by other lenders. It will create more jobs and drive long-term economic growth across the UK’s nations and regions, while strengthening the modern Industrial Strategy sectors which are critical to the UK’s future competitiveness.”
Adam Kelly, Managing Director and Co-Head of Funds, British Business Bank
“Through our Modern Industrial Strategy, this Government is ensuring businesses with the highest growth potential have the capital they need to succeed here 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.”
Blair McDougall, Minister for Small Business and Economic Transformation
“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. 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.”
Walid Fakhry, Co-Managing Partner, Soho Square Capital
