A new £70m lending facility aimed at fast-growing companies that struggle to attract conventional finance has launched in London, with backing from the Mayor of London and the British Business Bank.

Known as the Future London Growth Fund, the vehicle is managed by investment firm FSE Group and will provide loans of between £1m and £3m to companies across London's 32 boroughs and the City. It was launched on Thursday.

The fund is designed to plug the gap between traditional bank lending and larger venture debt transactions, serving businesses with strong growth prospects that may not yet be profitable. Because the facility lends rather than invests for equity, it offers growth capital to companies that want to fund expansion without selling shares — a stage at which financing options are otherwise at their narrowest.

Cornerstone commitments have been secured from the British Business Bank, the UK's state-backed development bank, which is contributing £20m, and Funding London, the Mayor's investment arm.

The debut comes as British businesses face mounting pressure over access to capital, with founders warning that funding shortages are pushing promising companies to scale overseas. Despite London's status as a global financial centre, smaller firms continue to find growth funding difficult to secure.

Data from the British Business Bank underlines the disparity: 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 lands 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. The new vehicle adds a debt-based option to that broader effort to keep scaling companies funded in the UK.

Concerns remain, however, that traditional lenders are failing to support businesses caught between early-stage funding and larger institutional investment. How quickly the fund deploys its first loans across the boroughs, and whether the Autumn Budget responds to the calls on access to finance, will offer early markers of whether the gap is narrowing.

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 — experience it now brings to the London mandate.

Source: City AM