£40m Cornwall & Isles of Scilly Investment Fund (CIOSIF) launches with a request for trumpets

Featuring Richard Wadman | 3rd July, 2018

We have had representation at the launch event as well as the two subsequent briefings.  I will blog with more details on the CIOSIF in due course, but for now, a few headlines from my attendance at the Newquay briefing:

We are in good hands

The CIOS LEP has delegated the administration/ set up of the CIOSIF to the British Business Bank.  The British Business Bank has set up similar schemes in the North (Northern Powerhouse Investment Fund) and Midlands (Midlands Engine Investment Fund). I was speaking to a representative of the British Business Bank after the presentation who said that the Northern Powerhouse Investment Fund has invested £50m to businesses in the North.

The Fund Managers also appear to have good track records – The FSE Group (equity and larger debt) and SWIG Services (debt).

People are already thinking beyond the initial ten years and the £40m

All speakers today evangelised about the potential for the CIOSIF to carry on beyond the ten years that it is initially set to run.  Also, mention was made on a few occasions of potential for further funds to be invested into the CIOSIF by the British Business Bank and/ or Institutional Investors. Both of the aforementioned (longevity and further investment) require the CIOSIF to perform in terms of generating a return on investment.

Trumpets at the ready

A request was made of us, professional advisers, to disseminate information of the CIOSIF to businesses in the CIOS region (and those tempted to relocate).  My colleagues and I will be doing this and are already in discussions with the Fund Managers for them to meet with the Managers and Partners here at PKF Francis Clark. They may also be potentially getting involved in some of the Breakfast Briefings that Andrew James is planning over the coming months – watch this space.

Positioning is key

The CIOSIF will not be for all businesses as the website indicates it is “commercially focussed finance to help SME’s start -up and grow”.  The debt is not ‘cheap’, interest rates of 10% to 14% above base were mentioned, and the equity has to be matched.  The former represents the CIOSIF’s place in the market place – it is not a substitute for bank debt.  It is to ‘fill a gap’ for propositions that cannot access funds from a bank.

I believe that as the funding is derived from European funds, European eligibility rules may come into play and this is supported to a degree by the reference on the website to “CIOSIF-sourced funding cannot be used to invest in businesses in the following sectors: property development, ship building and agriculture. In addition, it cannot be used re-finance existing commercial borrowing or help failing businesses.”

More details to follow

As I have previously mentioned, I will be sharing more details in the next week or so, including for my own interest the rationale for the requirement for the match on the equity.  We will be looking to trumpet about this, but for now, I leave you with a quote from my esteemed colleague:

 “This fund is a welcome and significant addition to the financial toolkit for businesses and their advisers, especially in helping to close the equity gap for smaller deals that the larger equity firms are increasingly tending to overlook. We are in discussions with a number of companies who are already interested in finding out more about how the fund could help with their growth ambitions, and we look forward to exploring those opportunities with them.”David Armstrong, Corporate Finance Director, PKF Francis Clark

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