Turnaround Capital is to a launch a fund that will look to turn struggling businesses into profitable ones within a set timeframe.
The group is looking to raise £1.6m in pre-IPO funding and will take stakes of 10 to 70 per cent in private companies that have struggled due to bad management, restricted cash flow or excessive debt.
The investment in these firms will look to restructure the firm and potentially give them a listing on the junior stock market.
The investment will come across a number of sectors with a representative installed on the Board of the invested firms. It aims to maximise its income and capital by typically covering 70 per cent of its investment by way of a loan repayable over two years at an interest rate of around 10 per cent with the remaining 30 per cent invested as equity.
Aim-listed investment firm Capital Ideas will act as corporate adviser for Turnaround Capital plc.
Capital Ideas chairman Renwick Haddow says: “We believe the current credit crunch will provide plenty of opportunities for investing in basically sound businesses which are experiencing difficulties which may be not of their making.
“We also see this as a chance for wealthy private investors who do not ordinarily have an opportunity to invest in close ended Venture Capital Trusts with the potential to produce high returns on capital. However, we appreciate this is a high risk investment but are confident it will succeed”.