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When looking at options for funding to support the growth of their company, many business owners view equity finance as a vessel for growth and debt finance as something you use for the more business as usual activities such as buying assets and stock or cash flow management. However, writes Danny Jones (pictured), Head of Debt, South West at The FSE Group, debt finance can also be a beneficial way to fuel growth. 
The FSE Group has been funding SMEs with high-growth potential since 2002, starting in the South East of England and, over time, increasing its presence across the UK. When the British Business Bank launched the £200million South West Investment Fund in 2023, FSE was appointed a fund manager, with a remit to provide growth loans between £100,000 and £2million to foster sustainable economic growth.
In what instances would a South West Investment Fund loan from The FSE Group be more appropriate for a business than equity investment or other forms of finance?
This funding can be used for a range of growth-related activities including product development, marketing, new staff hires and expanding/moving premises, and could be appropriate for businesses that don’t meet the lending criteria of traditional loan providers such as high street banks.
A lot of businesses think debt is only available if you have tangible assets and can provide a positive trading history but this is projection-based lending: we’re not assessing applications based on past performance; we are assessing the credibility and realisability of the growth plan and the assumed financial outcomes of that growth plan – we are looking to understand the business model, gain an insight into the journey to date, historic trading performance, trends and the trajectory the business is on.
We can provide businesses that have the opportunity to grow and scale but cannot show past financial performance to support repayment viability, or cannot offer tangible assets as security, an avenue to gain the finance needed to fuel growth. In turn, this can help to increase the value of a business ahead of future equity raises.
FSE is more interested in forecasts than historic trading performance. As long as a business is growing, FSE can consider all different stages of the lifecycle, from early-stage businesses with some commercial traction to fully-established businesses looking to accelerate their growth.
What are some of the common misconceptions about debt finance?
As mentioned, despite preconceptions, debt finance can be a beneficial way to fuel growth. Some businesses may have already taken on equity and not want further dilution; others may be looking to finance growth activity to boost their valuation prior to a funding round; in some cases debt can be provided as part of a larger round that also includes equity investment, acting as a pillar to provide added confidence to other investors. A South West Investment Fund loan can form part of a bigger funding raise alongside banks, equity investors and other funders so it doesn’t need to be a decision between one or the other.
What kind of businesses does this Fund invest in?
The fund is sector agnostic and the current portfolio at FSE includes a multi-site restaurant business, a digital mental health triage solution, a play equipment manufacturer, an accountancy software developer, a men’s skincare brand and a leisure activities business. What’s more important is that there is a demonstrable growth opportunity and a founder/team who can, with the right support, deliver that growth. 
Gridimp, based in Wells, is a tech business providing commercial energy consumers with smart microgrid solutions to optimise their energy consumption, storage and distribution, helping to reduce costs and minimise carbon footprint. The company received a £250,000 South West Investment Fund loan, which enabled the creation of new jobs as well as the move to a new office, better suited to the needs of its growing team.
What does a business need to have in place in order to secure a South West Investment Fund loan?
Any SME that needs funding for growth – or brokers/finance intermediaries and advisors working with such businesses – should get in touch with FSE. The website enquiry form is a great way to provide initial details, or the team can be contacted by phone on 01276 608510 or email swif@thefsegroup.com. If a business wants to progress to a full application they will need to provide a business plan and relevant financial and management information as well as a completed full application form.
As a Community Interest Company, part of our ethos is to support underrepresented businesses in the UK so being an appointed fund manager for the South West Investment Fund aligns well. The South West has a vibrant business ecosystem and a rich history among both emerging sectors such as MarineTech and Offshore Energy, and traditional areas including Mining and Manufacturing. This provides ample opportunity for growth businesses offering innovative solutions and The FSE Group is excited to be a part of that.
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