A new £70m fund backed by the Mayor of London and the British Business Bank has launched to help growing businesses struggling to secure finance from traditional lenders.
The Future London Growth Fund, managed by investment firm FSE Group, will offer loans of between £1m and £3m to companies across London’s 32 boroughs and the City.
The fund, launched on Thursday, aims to bridge the gap between conventional bank lending and larger venture debt deals, targeting businesses with strong growth prospects that may not yet be profitable.
It has secured cornerstone commitments from the British Business Bank, which is providing £20m, and Funding London, the Mayor’s investment arm.
The launch comes as British businesses face mounting pressure over access to capital, with founders warning that funding shortages are forcing promising companies to scale overseas.
Despite London’s status as a global financial centre, smaller businesses continue to struggle to secure growth funding.
Research from the British Business Bank found that just 71 per cent of London’s business owners reported making a profit, compared with 84 per cent nationally.
“London is the best city in the world to start and grow a business, but too often many are overlooked by traditional finance providers”, said Sadiq Khan.
“The Future London Growth Fund directly targets that funding gap and will provide a huge boost to businesses looking to scale up”.
London’s funding gap
The scheme comes ahead of the Autumn Budget, with business leaders calling for greater investment incentives and improved access to finance.
Earlier this year, major UK pension providers committed to exploring a £1bn-plus Scale-Up Fund aimed at channelling more domestic capital into fast-growing British science and technology companies.
However, concerns remain that traditional lenders are failing to support businesses caught between early-stage funding and larger institutional investment.
Kala Desai, head of the new fund, said London’s strong startup ecosystem masked persistent barriers to growth.
“London is home to an exceptional community of high-growth, innovative businesses, yet many still hit a barrier when accessing scale-up capital”, she said.
FSE, which manages almost £460m in funds, has previously supported more than 1,000 growing businesses across sectors including technology, clean energy and advanced manufacturing.