A 3i spokeswoman said: 'The directors are exploring alternative funding options. 3i won' t be backing the company going forward. This is a small legacy investment. We will provide funding for companies that are performing well.'
A company spokeswoman admitted it has experienced 'some trading difficulties'. But she added: 'We are not going into liquidation and are trading as normal. None of the staff have been laid off.'
Sources close to the firm said the company has debts of around £9.5 million.
Sheffield firm Euro Decommissioning Services is understood to have put in an offer for the firm which was rebuffed.
Swansea contractor Cuddy Demolition is also thought to have expressed interest.
One rival firm, which has not made a bid, said: 'It is fair to say Controlled has overextended itself in recent times, such as undercutting on work, and it is coming home to roost.'
Controlled was forced to hire security guards at its Wakefield headquarters last week to deal with angry subbies who say they have been left out of pocket to the tune of thousands of pounds.
The boss of one firm, who claims he is owed £60,000, said: 'I went down there on Friday and there was a crowd of people outside and four bouncers guarding the doors.
'There are a few really good specialist firms based in London that won' t be able to take this knock if they don' t get their money.'
A senior employee at Controlled said: 'You can see how bad it is by the fact they' ve had to employ bouncers outside the offices for protection.'
The company has worked on a number of high-profile projects including a deal to tear down the south stand for Mowlem at the home of English rugby union, Twickenham, in west London.
Controlled Demolition's parent company, Controlled Group Holdings, increased its turn over 20 per cent to £19.64 million in the year to September 2004, up from £16.34 million in the previous 12 months, according to accounts filed at Companies House.
Profits before tax were down slightly to just over £205,000 from nearly £213,000 the previous year. Staff numbers increased year-on-year to 145 from 131.