The European Commission, under EU state aid rules, has approved a scheme to promote venture capital funds for UK small businesses.
The UK scheme aims to increase the amount of equity funding for small and medium-sized enterprises, with licensed enterprise capital funds (ECFs) combining private and public money to supply equity finance to small firms.
Public money would be used to leverage private money, with the ECFs making repayments with interest plus a share of the profits for the public.
The investments proposed range between €357,000 (£250,000) and €2.9 million (£2 million), potentially exceeding the maximum foreseen by the Commission's Risk Capital Communication. In this circumstance, the Communication states that the member state needs to provide evidence of market failure.
"Small and medium-sized businesses have an important role to play in strengthening the European economy and creating jobs, and this scheme will help them to flourish in the UK," said commissioner Neelie Kroes.
"This scheme is a good example of how state aid can play a very positive role, notably in boosting competitiveness in areas where the market often fails to provide adequate finance."
Following a formal investigation in May 2004 regarding the size of the 'equity gap' (a finance shortfall in the small to medium range deal size), the Commission received comments from 20 interested parties, with uniform opinion suggesting that the equity gap reaches up to at least €3 million (£2 million).
The Commission has also boosted small businesses' and start-ups' chances of attracting investments, through its support for the Gate2Growth pan-European business platform, whose member InvestorNet has developed an online self-assessment tool designed to aid entrepreneurs and management teams to draft professional business plans.
SAT-light provides a checklist, allowing the business plan to be benchmarked against investor expectations, while also highlighting areas for improvement.
While not judging whether the plan is an economically viable proposition, it can help assess whether the plan is ready for presentation to potential investors.