Bank opens lawyers' eyes to new VCT funds

Small businesses will be able to draw on funds from eight new venture capital trusts launched in the last fortnight.

Merchant bank Guinness Mahon, which has raised £9 million for one of the new trusts, said lawyers advising smaller companies should be aware about "this important new source of venture capital".

Venture capital trusts were introduced by the Government in the 1993 Budget and the first one was officially launched in September 1995. They offer tax breaks to private investors who are invited to put money into trusts which, in turn, invest in small businesses.

A spokeswoman for the British Venture Capital Association said: "VCTs should benefit entrepreneurs by increasing the supply of venture capital for certain companies seeking under £1 million of venture capital a year."

Small businesses eligible to receive VCT funding should not have gross assets that exceed about £9 million.

Gordon Power, managing director of Guinness Mahon Development Capital said: "Lawyers and accountants are the often the first port of call for small companies seeking funds to expand or set up new ventures."

The total amount raised by 12 VCTs now stands at £133 million. A number of well-known fund managers have launched trusts including Gartmore, Johnson Fry and Close Brothers.

The Government views VCTs as an ideal way of marrying the appetite of private investors for attractive opportunities and the need of small businesses seeking funds from sources other than bank overdrafts.