ONE of Scotland’s highest-profile entrepreneurs has backed his new investment vehicle to fill a much-needed funding gap for Scottish businesses, amid concern a rise in interest rates will further tighten bank lending.

Mike Welch formed Full Circle Partners in September following his successful exit from Blackcircles.com, the online tyre business he built up in the Scottish Borders before selling it to Michelin for £50 million.

The vehicle, which has taken stakes in online fashion retailer Atterley.com and wearable tech firm PlayerData, was set up to invest in businesses as well as advise owners on company structure, legal matters, marketing and on how to achieve exits.

Its move into the market has come as concern is raised by senior business figures over a dearth of backing for emerging entrepreneurs and growing small businesses in Scotland, with veteran industrialist Jim McColl last month revealing plans to set up a dedicated business bank to address the issue.

With the Bank of England tipped to increase the base interest rate in May to combat surging inflation, there are fears it will become even more expensive for business owners to borrow from the banks.

Mr Welch, who set up his first online tyre business at the age of 17 in 1995, said: “It’s just about having the flexibility. Where the computer in the big institutional investment or organisation says no, we can say yes.

“That fundamentally doesn’t mean we are going to take more risk, it just means we have the flexibility to assess and appraise an opportunity and extend the finance or the investment to bridge that gap.

“And I think the landscape is changing a lot. It’s [a] really interesting time from an investor’s perspective, in both the start-up community and also in the property market. Property

prices are quite expensive at the moment. I think lenders are quite tentative about whether we have reached the top in terms of prices. That maybe leads to a little bit of apathy around investment and lending.”

Mr Welch added: “Where there’s a great product and really strong developers we’re well placed to have a conversation and bridge any gap between them and the traditional funders.”

Full Circle Partners has launched a property development fund, which is aimed at securing finance for developers who require finance, either to acquire assets or complete projects.

The fund, which aims to invest £20 million over a 12 to 18-month period, is run by Matthew Edgar, a property sector veteran and long-term advisor to Mr Welch. It is currently backing six projects around the Central Belt.

Mr Welch, who noted that the property division funds investments from its own balance sheet, said: “With bank lending starting to tighten up a little bit, and interest rates starting to rise, I see a much bigger opportunity over the course of the next couple of years for that business.

“In effect, we play the role of the bank, but on a much more, dare I say it, flexible format. Where we work really well is with developers who are in the final stages of a development and require funding to complete a project, or even the acquisition of an asset where funds are needed quickly.

“We are able to facilitate a short to medium time-length loan to be a catalyst for these projects at the different phases they might find themselves [in].

“That sits quite nicely with the bank funding, because the banks are looking for these projects, particularly in the early stages, to have a cornerstone investment that they can sell alongside or follow on from.”

Mr Welch is joined in Full Circle Partners by corporate lawyer Paul Jarman-Williams, formerly of Dickson Minto, and public relations specialist Nick Freer. Asked to assess the quality of business ideas emerging in Scotland, which his vehicle would consider backing, Mr Welch said: “There’s loads. It’s just about, as always, picking the winners. There are lots of people with lots of ideas to start businesses, way more than when I started Blackcircles. That’s a really positive thing.

“The investor community is a lot more surfaced than it used to be. It’s a lot easier for these guys to go and pitch their ideas and find funds to get started.

“One of the challenges in the past has perhaps businesses being priced quite high because there has been a lack of real quality. That said, we’re seeing some really high-quality businesses coming through with really strong leaders with good, solid visions. That’s what you end up investing in – the people.”

Speaking shortly after a visit to India, where has personally taken a 10 per cent stake and a board seat in Tyremarket.com – an Indian equivalent to Blackcircles – Mr Welch revealed that Full Circle has recently taken on a partner in its new Singapore office. Debra Langley, who led the international expansion of fashion brand DKNY outside the US, and has successfully run and exited two online fashion businesses, is an adviser to Atterley and the firm’s other online businesses.

Mr Welch said other geographical expansion will follow. “What it gives us is a nice read across to businesses who are in south-east Asia, or who are in the UK and trying to go the other way. So, in terms of international expansion we’ve got the ability to have conversations in markets with investors in different parts of the world.”