West Midlands Pension Fund backs new £81.5 million debt fund to boost regional SMEs
Frontier Development Capital (FDC), a debt funding specialist under Mercia Asset Management, has launched an £81.5 million fund to support the growth of regional SMEs and enhance sustainability efforts.
The Evolution Fund will specifically target businesses in the Midlands and the North of England. Backed by £80 million in commitments from the West Midlands Pension Fund (WMPF) and the British Business Bank – each contributing £40 million – the fund offers flexible debt solutions ranging from £1 million to £8 million. These funds will be available to established SMEs across all sectors, provided they demonstrate proven business performance, growth potential, and strong leadership.
Businesses can utilize this funding to support transactions such as management buyouts, acquisitions, shareholder reorganisations, and debt refinancing. Additionally, it provides growth capital and aids firms in embedding sustainability practices as they work toward achieving carbon net zero.
Headquartered in Birmingham with offices nationwide, FDC has a strong history of supporting regional SMEs, having invested over £200 million since its inception in 2016. The Evolution Fund marks the second time the British Business Bank has backed an FDC initiative and the third instance of support from the West Midlands Pension Fund.
Designed to address a market gap for business loans under £10 million, the eight-year fund offers “bullet terms”, enabling firms to repay the bulk of the capital at the end of the loan period — minimising the immediate strain on cash flow.
Shiventa Sivanesan, Assistant Director – Investment Management and Stewardship at the West Midlands Pension Fund, stated: “We’re excited to build on our existing partnership with FDC and the British Business Bank as part of our long-term commitment to support regional SMEs. Our investment is expected to deliver competitive returns aligned with our responsible investment values, allowing us to serve the interests of our members. Businesses are operating in an uncertain and challenging environment, and by improving their access to funding, we can enable them to grow and fulfil their potential. We hope other investors will follow our lead and help scale up the support SMEs need to grow and thrive.”
Adam Kelly, Managing Director and Co-Head of Funds at the British Business Bank, commented: “We are pleased to continue our support for FDC, having previously backed the FDC Debt Fund in 2020. The British Business Bank is committed to increasing the supply and diversity of finance for smaller businesses. By backing experienced fund managers like FDC, we help improve access to finance for ambitious companies across the UK’s nations and regions.”
Graham Mold, Head of Growth Capital at Frontier Development Capital, added: “Despite the variety of debt providers in the market, it is still difficult for smaller firms to secure capital, as many funders are unwilling to lend sums of under £10 million or support transactions involving SMEs.
The Evolution Fund reinforces FDC’s commitment to regional businesses often underserved by traditional lenders. As no two deals are the same, the fund is designed to meet the need for tailored SME funding. Our team’s ability to assess risk, structure investments, and support resilient businesses makes FDC a valued funding partner.”
