Interview: Shaping Greater Manchester’s future through the £20m Loan Fund

The Greater Manchester Loan Fund (GMLF), a multi-million pound cash pot offering the county’s businesses six-figure funding to safeguard jobs and support economic growth, has popped up on my radar several times in recent weeks.

I wanted to know more about the ways in which the Fund is positioning Greater Manchester as the epicentre of the North’s economy. How do businesses benefit, and what sort of companies can apply? Where is the Fund headed once its remaining balance has been dished out?

The GMLF was set up by the Association of Greater Manchester Authorities and is managed by private equity firm Maven Capital, so I called Maven investment director Andy Thomas and the Greater Manchester Combined Authority’s (GMCA) chief investment officer, Bill Enevoldson, to find out more.

“While we were already lending to businesses with turnovers of between £500k and £5m,” Bill explained, “we recognised that this was leaving a gap in the market at the sub-£500k level. So we went out on a full-blown procurement process in which there were a number of bidders.

“Maven were successful in that process and they’ve run the Loan Fund for us since then, which has been just over three years. We recognised that we didn’t have the resources or the skills to address this end of the market.”

I asked what Maven’s history of supporting small businesses had looked like prior to managing the GMLF.

Andy told me: “What Maven has been successful in doing over the last five or six years is using our background in private equity and applying it to public-sector funds.

We’re encouraging businesses in Greater Manchester with growth aspirations to come forward now while the GMLF has funding

“Maven previously managed something called Capital for Enterprise, which was backed by the government and a number of banks. We currently manage the Scottish Loan Fund, backed by the Scottish Investment Bank and various others.

“So it was with that background that when the GMCA put the tender opportunity out there, Maven chose to bid for it.”

To date, the GMLF has invested £10m in businesses across the region. I asked Andy how Maven plans to support SMEs through the GMLF in the future.

He said: “The GMLF wants to invest £20m. We’re just over halfway through that, and we have two years left to make those investments.

“We’re encouraging businesses in Greater Manchester with growth aspirations to come forward now while the GMLF has funding.”

In addition to providing capital, the GMLF supports businesses in non-financial ways, whether that’s through advice founded on the team’s experience working with growing enterprises, or by introducing companies in its portfolio that may be able to help one another.

We’ve invested in businesses across a range of sectors, from manufacturing and technology to telecoms and professional services

I asked Andy what the GMLF looks for in an investee firm. What should businesses be doing in order to make themselves more attractive for prospective investors?

“The Fund is sector agnostic,” Andy explained. “We’ve invested in businesses across a range of sectors, from manufacturing and technology to telecoms and professional services.

“We’re after businesses with good management teams and ambitions to grow and create employment in their areas.”

He said the Fund is calling for companies with a solid business plan – those with management teams that have thought through the practical steps involved in growth.

Andy continued: “If they plan to grow by expanding the sales team, for example, we want to see if they’ve thought about and understood how they’re going to carry out the recruitment process, where they’re going to attract the talent from, how they’re going to target and incentivise.

“We also want to check that management teams have thought about plans B, C and D as well as plan A. Our experience of working with growing businesses has shown us that plan A rarely happens exactly as expected.”

The reality, Andy said, might be better or it could be worse, but rarely will everything go smoothly. He added: “Attractive plans are the ones where the teams have clearly thought about the key variables, what could change, and how they might adapt to those changes when they happen.”

GMLF support is available for businesses at the sub-£500k turnover level – does that include startups?

“The only restriction is that applicants have to be SMEs,” Andy explained. “We’ve backed businesses of all stages. I think the youngest enterprise we’ve backed to date was established around 18 months before we invested.

“The oldest had been operating for about 42 years when we invested. So it really is all shapes and all sizes.”

As the GMLF is looking to invest a further £10m on top of the £10m already invested, I wondered if there was a chance that figure could be extended further.

Bill told me: “We are looking at funding that’s available through the European process. The Chancellor announced a few weekends ago that anything which gets through by the Autumn Statement will hold good.

We’ve got the funds to make more of this available if there is a demonstrable shortage

“There’s the Northern Powerhouse fund, which Greater Manchester is a part of, and that is about £400m of debt and equity funds across the whole of the North (except Newcastle and Tyneside, as they opted not to be in it).

“If that goes ahead – and it is, as it’s likely to be finalised over the next month – then that would give us approximately £100m of debt and equity funding to invest in Greater Manchester SMEs over the coming five years.

“If that’s enough then we probably wouldn’t look to invest more, but if it isn’t, if there’s demonstrable demand in Greater Manchester for more of this type of funding, then yes we would extend Maven’s brief here. We’ve got the funds to make more of this available if there is a demonstrable shortage.”

To round off our discussion, I asked Bill if he believed Britain’s recent decision to leave the European Union could have a negative impact on the region’s economy. How does he foresee businesses here weathering the economic uncertainty, and how do Maven and the GMLF fit into that equation?

“I think in the short term, Brexit will provide challenges,” Bill said. “We know that. Longer term, it’s more difficult to work out what’s really going to happen, because the long-term benefits of course aren’t going to materialise in sixth months or a year. It’s going to be longer than that for us to see the benefits of leaving the EU, if indeed there will be any at all.

“So really over the next couple of years, Greater Manchester generally is thinking ‘Well, what are the challenges posed by Brexit? And what can we do to help the region’s businesses?’ If that means making more capital available then it’s something we would look hard at, whether that’s through Maven or other funds we have.”

The UK has been in a position for some time now, Bill explained, where bank finance has become very difficult to get hold of.

He added: “The funds we deploy, we’ve been in this position for a long time now, trying to plug the gap that the banks have left, and I think this will just see that continuing for another couple of years.”