The British Business Bank (BBB) has committed an additional £40m to Harwood Private Capital to increase the supply of flexible growth capital to smaller businesses across the UK, offering an alternative to traditional lenders and M&A transactions.

The investment supports the first close of Harwood Private Capital UK Fund II, bringing total commitments across the fund and its committed co-investment vehicles to approximately £120m.

The fund and its co-investment vehicles will back smaller and lower mid-market private companies, helping them pursue expansion, acquisitions and shareholder transitions.

The commitment supports the British Business Bank’s objective of improving access to finance for smaller businesses throughout the UK, particularly where there are gaps in the market for growth and scale-up capital.

This latest investment takes the Bank’s total commitment to Harwood to £75m, building on its £35m commitment to Harwood’s inaugural fund, HPC UK SME Fund, in 2020.

Harwood Private Capital is a private credit investment manager specialising in flexible debt solutions for UK lower mid-market businesses. Its inaugural fund has supported businesses operating across a range of sectors, including digital technology, clean energy supply chains, manufacturing and tourism.

Adam Kelly, managing director, debt & regional funds at the British Business Bank, said: “Many smaller businesses continue to face challenges accessing the flexible growth capital they need to scale, invest and realise their ambitions. Harwood has developed a strong track record of providing tailored financing solutions to UK SMEs, particularly those that have not been backed by private equity. Our commitment will help increase the availability of growth capital for businesses, support economic growth and create jobs throughout the UK.

Haseeb Aziz, managing partner at Harwood Private Capital, said: “The British Business Bank has backed Harwood Private Capital since our first fund, and this renewed commitment reflects the strength of that partnership. Founder and family-owned businesses are the backbone of the UK economy, yet many are still underserved by traditional lenders whilst wishing to maintain ownership control.

“The £120m of committed capital allows us to keep providing the flexible, partnership capital these businesses need to grow, make acquisitions and manage ownership transitions on their own terms.”