former England footballer Danny Mills and retail entrepreneur Tim Whitworth are among the backers of a new fund launched by Yorkshire private equity house Endless.
The pair have joined veteran banker Wayne Bowser and Big Four accountant Stuart Counsell on the advisory board of the £10m fund.
The investment vehicle, called Enact, will be targeted at small and medium-sized businesses that are struggling to get bank debt.
“It can help businesses that are victims of the current funding market,” said Chris Clegg, managing director of Endless.
Enact’s strategy is to invest in SMEs across the UK that have a robust business model, but are facing cash flow constraints, strategic or operational issues.
It has been launched at a time when traditional funders such as banks and private equity have become increasingly focused on mature and stable companies with limited appetite to support businesses in more challenging situations.
Mr Clegg said Enact will fill a much-needed funding gap in the SME market as banks continue to limit levels of funding to smaller businesses.
Existing Endless funds target larger businesses, with turnovers typically in excess of £50m.
Mr Clegg said: “When Endless started (in 2005), we were investing in SMEs. Our initial modus operandi was putting a couple of million into smaller deals.”
Standout early transactions include bespoke furniture maker Neville Johnson and heavy engineer Davy Markham.
Endless, based in Leeds, has raised funds worth £450m to date from regional, national and international investors.
But its growth has come at a cost: Endless has been unable to service the SME market, despite seeing good opportunities among businesses struggling to get bank debt, said Mr Clegg.
The new fund is targeting companies with 250 employees or less. It is looking at investing up to £2m of equity into individual companies in any sector or region, but they must meet the qualifying criteria for the Government’s Enterprise Investment Scheme (EIS) and be able to benefit from “a hands-on approach”.
Enact is structured to benefit from EIS, which gives investors access to benefits such as 30 per cent income tax relief and capital gains tax relief.
The team at Endless has raised £7.5m to date and is confident the fund will reach £10m. The private equity firm is investing its own money alongside 30 other high-net worth investors.
Mr Clegg said the investors come from a variety of backgrounds and have strengths in sectors such as financial services, retail, manufacturing, distribution and information technology.
Endless said that in addition to benefiting from an active investor base, Enact will operate an advisory board to provide additional perspective and skills to the investment team.
The board will offer a cross section of financial, operational and advisory expertise as well as corporate governance.
The presence of former Leeds United footballer Danny Mills on the board is likely to attract attention. He built up numerous business and investment interests prior to and after his retirement from football in 2009, said Endless.
He will be joined by Tim Whitworth, the co-founder and former chief executive of Republic.
The Leeds-based business was one of the retail success stories of the last decade, but fell into difficulties following its last management buyout.
Other members include Wayne Bowser, a former high-flyer at HSBC who joined Endless as a non-executive director earlier this year.
He held positions including regional director for the North of England and latterly as deputy head of commercial banking based in Canary Wharf.
Stuart Counsell is another member of the advisory board. He is a business advisory expert and former managing partner of Deloitte’s 17 regional offices in the UK.
Mr Clegg said: “Enact represents a natural expansion of the Endless investment offering.
“While our current funds continue to focus on the mid-market, we are very excited about extending our reach to finding the hidden gems of the smaller business market, particularly given the absence of funding for these companies.
“Our investment track record and access to such a sophisticated and talented network of investors truly makes Enact a unique proposition in a market desperate for proactive and supportive investment.”