A £150m investment fund aimed at driving the growth of SMEs in Scotland is set to be launched this summer.

The Investment Fund for Scotland from the British Business Bank will offer commercial finance options with loans from £25,000 to £2 million and equity investment of up to £5 million.

The planned launch comes as figures show demand for funding from SMEs is rising at the same time as major banks are reducing their lending appetite. Data from credit fintech Iwoca showed that more than eight in ten finance brokers reported major banks are now less willing to fund SMEs.

Ken Cooper, managing director of Venture Solutions at the British Business Bank, said the new fund aims to break down barriers that small firms may face in accessing finance, creating a more level playing field. 

“While we have seen an encouraging stream of equity deals into Scottish firms over the past couple of years, the overall levels of equity investment and also private debt lending remain much lower than Scotland’s share of the UK’s small business population,” he said.

“Given the geographical spread of Scotland’s smaller business population, connecting with entrepreneurs in some of the more rural and hard-to-reach areas will be an important focus of the fund.”   

Another new fund launched in Scotland and targeting SMEs made its first investment recently.

Foresight’s £60 million Scotland Fund, backed by Strathclyde Pension Fund and British Business Investments, completed a £3.8 million investment in South Lanarkshire-based Electric Heating Company which aims to launch a range of air source heat pumps for domestic use. Macdonald Henderson advised the company.