Kreos Capital, a venture capital firm which has backed the likes of LoveFilm.com and pay-day loan company Wonga, aims to increase its new fund from 130 million to 200 million euros ($266 million) to help finance small UK companies looking to grow.
Kreos, which was founded in 1998, said it had already raised some 130 million euros for its latest growth debt fund - Kreos Capital IV - in the first quarter, and was confident of getting a final amount of 200 million by the end of 2012. "We're very focused on SMEs (small-and-medium sized enterprises). Not surprisingly, there's a lot of demand there," said Kreos Capital partner Simon Hirtzel.
Hirtzel said Kreos' latest fund had attracted an institutional investor base including pension funds and insurers, attracted by a 5 percent coupon payment. Britain's Conservative-led coalition government is keen to increase the credit supply for small companies, hoping that by boosting lending to those firms, they can then grow and in turn help revitalise the country's flagging economy.
However, many firms are having to seek alternative means of finance, often from private equity firms or new start-up banks, since they have found it hard to get credit from Britain's biggest banks. Earlier this month, Britain launched a new 20 billion pound credit easing scheme to get more loans through to small businesses, but critics say the programme may not make it much easier for the smallest companies to get funds.
Kreos' Hirtzel said it was too early to judge how effective this new plan would be, but added that in the meantime his firm would continue to invest in fast-growing companies in Britain and Europe. "Kreos continues to target those companies that, having traded profitability for growth, are the most affected by the lack of bank lending to support the increasing working capital funding gap that is an immediate result of fast growth," he said.
"If they don't have access to debt financing and have to rely solely on equity, these companies won't be able to deliver on their employment growth potential, with obvious negative repercussions on the UK and EU economy." ($1 = 0.7509 euros).
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