Leading venture capitalist Luke Johnson has said the Business Growth Fund (BGF) is “doomed” in a withering attack on the government’s latest small business finance initiative.
Speaking to The Financial Times (FT) ahead of the launch of the BGF later this week, Johnson added that the fund is nothing more than “a PR stunt by the clearing banks, which are obviously under a lot of political pressure to support British industry."
He also claimed that, far from resolving the problem of debt finance, the banks “have invented a non-problem” and claimed they are “crowing out experienced, sensibly priced money.”
Johnson’s concerns were amplified by private client investment specialist Claire Madden, who told The FT that the BGF’s provision of equity funding, rather than standard loans, is out of synch with the requirements of a small business.
“At this level, companies want bank not equity funding,” she said.
The BGF will open for business on Thursday, with a combined value of £2.5bn. The fund’s managers will target businesses turning over between £10m and £100m.
Each business deemed worthy of funding will receive between £2m and £10m, in return for an equity stake of between 10% and 50%.