- The FSE Group has launched the Future London Growth Fund, providing over £70 million in loans to help London-based scaleups grow.
- The fund aims to support 40 to 50 businesses and will reinvest the capital when the loans are repaid.
- British Business Bank put in £20M as a cornerstone, alongside Funding London
Many younger companies in London are excluded by traditional lenders before any conversation has taken place, according to Kala Desai, head of the Future London Growth Fund at FSE.
The Future London Growth Fund was established to address this issue and plans to offer more than £70M in loans across all 32 London boroughs and the City, aiming to support 40 to 50 businesses.
The fund’s main commitments come from the British Business Bank (BBB), which has invested £20M, and from GLIF Limited, the Mayor’s investment arm, Funding London, as part of the London Growth Plan.
Loans of between £1 million and £3 million
The loans range from £1M to £3M and sit between conventional bank financing and larger venture debt. Desai told Tech Funding News that the fund plans to lend £70M in total, reinvesting repaid capital to help more businesses later.
“Our typical borrowers are innovative, high-growth businesses which have already demonstrated strong commercial performance, generally in the form of revenue, and are now looking for financing in order to reach the next phase of their growth,” she added.
Such businesses usually invest heavily in their future, for example by developing new products, entering new markets, or expanding their teams. Even if they are not profitable yet, what matters is a well-thought-out growth plan and a clear route to profitability, a goal our funding can help them achieve.
The portfolio will not be concentrated on a single technology sector.
“We plan to assist businesses in a wide variety of sectors, not just in one area of technology. Innovation will generally be at the heart of their business models, whatever that may be in the case of healthcare, education, transport, data, enterprise software, advanced manufacturing, or sustainable solutions,” Desai adds.
She also highlighted two previous FSE investments. The first is Springpod, a London-based edtech company whose platform has enabled more than 650,000 young people from diverse backgrounds to gain virtual work experience with leading employers. The second is VivaCity, a company that uses artificial intelligence to make city transport networks safer, more efficient and greener.
Why traditional lenders often say no
The issue starts with how lenders assess risk. According to Desai, one major difficulty is that traditional lenders tend to judge businesses based on past financial performance rather than future growth potential.
This is particularly difficult for ambitious companies that reinvest revenue in growth and may not be profitable yet. Few lenders are willing to look ahead and evaluate businesses based on the quality of their management and growth plans.
Adam Kelly, managing director of Debt and Regional Funds at BBB, stated, “Smaller businesses operating in underserved communities, or those without established investor networks, can still struggle to secure the growth capital they need to scale. Our £20 million cornerstone commitment to the Future London Growth Fund will help address that gap, increasing the availability of finance for businesses with strong growth potential and supporting economic opportunity across London’s diverse communities.”
BBB has been active in this area, supporting a £100M aerospace debt fund, £180M across six AI funds, and 10 microfunds with £90M. TFN has also mapped its £600M UK tech portfolio.
Puneet Raj Bhatia of Funding London noted, “As the Mayor of London’s investment arm, we’re delighted to bring to market the Future London Growth Fund designed specifically to close that gap, and to have the expertise of FSE and the backing of the British Business Bank alongside us. Together, we are giving London’s SMEs the capital they need to expand, create jobs, and contribute to the capital’s economic growth.”
FSE’s track record in London and future plans
Since 2019, FSE has been in charge of the debt aspect of the Funding London’s Greater London Investment Fund. Desai pointed out that the earlier debt fund, amounting to £66M, supported fast-growing companies in Hackney, Hounslow, Brent, Lambeth, Wandsworth, Westminster and the City. FSE has invested in more than 100 businesses in London so far.
Sadiq Khan, mayor of London, added, “London is the best city in the world to start and grow a business, but too often many are overlooked by traditional finance providers. As a key commitment of my London Growth Plan, the Future London Growth Fund directly targets that funding gap and will provide a huge boost to businesses looking to scale up, helping them accelerate development and create new jobs.”
The test will be how fast the £70M+ gets lent, and whether profitability-pending founders clear FSE’s bar.
