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Guide to the Northern Powerhouse Fund II (NPIF 2)

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Guide to the Northern Powerhouse Fund II (NPIF 2)

With the launch of the Northern Powerhouse Investment Fund II in March of 2024 it is vital that businesses understand the fund’s aims and the objectives. This will allow them to be prepared before making an approach and help improve their chances of accessing the fund.

What is NPIF 2?

NPIF 2 looks to build on the progress of the original investment fund and its primary objective remains the same, which is to address market failure. By that we mean it's a fund that will look to support businesses with finance where the private sector and particularly high street banks are unable to do so.

Of course, there are various reasons why high street banks may be unable to support; whether it is due to lack of security during the early stage of the business or a weak balance sheet may play a part.

So, the good news is that a decline from the bank does not necessarily mean the end of the road for a business seeking finance. Equally it's important to note that the appointed fund managers deploying NPIF 2 funds are aware of this.

Despite a decline from the bank, the fund manager will be looking for businesses that have growth potential and can demonstrate that potential via a detailed business plan and robust forecasting. 

There is a real opportunity here for businesses that may not meet the criteria of high street banks credit policy to access funding to fuel growth. 

The three NPIF 2 products

It's interesting to note there are three key products that sit within the fund, which are:

  • Smaller Loans: debt finance from £25,000 to £100,000
  • Debt Finance: term loan ranging from £100,000 to £2m
  • Equity Finance: which will make investments up to £5m

The three distinct products offer a wide range of options for businesses. However, having a targeted approach and understanding which is the best product for your business is key. 

Understanding each product can align with your growth plans and objectives.

Smaller Loans

The Smaller Loans product this is ideally suited for early-stage businesses that have established market traction and require small amounts of funding to continue their growth trajectory. 

For example, a business that has previously secured Start Up Loan funding in the past (also a British Business Bank product) may naturally graduate to the Smaller Loans product. This is because they would be able to demonstrate they have the ability to grow with additional funding.

Debt Finance

The Debt Finance product is there to support more established businesses with growth potential and ambition to invest in their business. 

A few examples of this could be, seeking to grow their workforce, fund capital expenditure, increase marketing and bring new products and services to market.

However, as with any debt finance product, debt serviceability is crucial and therefore businesses need to demonstrate the ability to repay.

In addition, possibly some form of security may be required which could be in the form of director's personal guarantees, debenture or a charge on an asset.

Equity Finance

The Equity Finance product is designed for businesses with high growth potential and scalability. This often includes businesses that are engaged in research, the development of new and innovative products that require longer term funding solutions in order for early-stage businesses to reach commercialisation, bringing new products and services to market or reaching profitability.

Notably different to debt finance, equity finance is the raising of capital through the sale of shares in the business. A completely different approach is required when engaging an equity investor as opposed to a debt provider.

It’s important that the business has the appropriate information and is well equipped to present its opportunities, objectives, management team, product and the service it offers. It’s also worth mentioning the solution the product provides to the marketplace. This information is key in demonstrating how the businesses plan will be executed to ensure the business will grow and scale. 

The key to any fundraising whether it is debt or equity-based, is to be well prepared, to understand and to have a targeted approach to the fund in which you wish to engage. 

Speak to a Boost Access to Finance specialist

The Boost Access to Finance team has been working with the British Business Bank and its appointed fund managers since the inception of the Northern Powerhouse Investment Fund. The team has established a history, strong relationship and understanding with these funders and can help advise, guide and support a business through the process in order to give them the best possible chance in securing funding. Contact our team on 0800 488 0057 to speak to a specialist.

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