DTI proposes knowledge funding

The Department of Trade and Industry has unveiled plans for a scheme to help knowledge-intensive start-up businesses, such as design consultancies, to secure finance.

Called Knowledge Funding, the proposals were outlined by Trade and Industry Secretary Stephen Byers last week, and consider three key options for businesses.

The first is a public/ private partnership fund which attracts investment from organisations in the private sector before making loans or investments in eligible businesses. This may be through a fund manager, central institution or local agent.

Another option is called the “challenge process”, whereby banks and other bodies could bid for Government finance to create and support new schemes for lending, or investing in knowledge-intensive businesses.

The final option is a loan, or equity guarantee, provided by the Government to the financiers of such businesses themselves. These would offer more flexible terms than the existing Small Firms Loan Guarantee Scheme.

According to Byers: “New knowledge-based businesses can often find it difficult to raise finance. They are often too young and small, and do not offer the growth potential to attract classic venture capital.

“Yet these are the very companies we need to encourage in order to prosper fully in the knowledge-driven economy.

“The Government’s aim must be to ensure that people with bright ideas can get the advice and finance they need to turn them into successful growth businesses.”

Consultations on the document are scheduled to take place over the next two months, before the results are made public at the end of this year, or early next year.

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