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Alternative capital moves to the mainstream

Alternative capital is becoming more mainstream, at least in the UK mid-market, according to a panel of capital providers assembled by mid-market M&A association, ACG UK.

 
The ‘Trends in Alternative Capital’ panel debate, the latest in ACG UK’s ‘Trends in…’ series, revealed broad agreement among the panellists, who represented the banking, private debt, asset based lending, private equity and corporate finance communities, that the funding environment for mid-market and SME businesses has evolved rapidly over the last five years.
 
This is resulting in closer collaboration between the different capital providers and more flexible and tailored financial solutions being provided to growth companies in the UK.
 
Chris Smith, a partner with Clearwater International, a multinational corporate finance house, and moderator of the panel, opened proceedings by revealing that 65 per cent of the deals they worked on in 2016 involved alternative capital up from 15 per cent per cent just four years ago.
 
The panel discussed the reasons for this, including supply side drivers such as quantitative easing and low interest rates that are increasing the amount of available capital. These are coupled with demand factors including a healthy number of successful UK SME firms that are in a position to take on debt and a growing awareness among the senior management in these businesses of the alternative financing options available to them and a greater willingness to take them on.
 
Richard Shaw, investment director at growth capital partners and chair of ACG UK, says: “Alternative finance structures have become part and parcel of capital raising and it is no longer the case that companies are mainly focused on their incumbent banking relationships or traditional sources of funds. For well managed businesses there are a wide and increasing range of funding options available at the various stages of the growth cycle – the key is to find the right supportive partner and funding structure for the situation. If the trends outlined by our panellists continue, it should provide continued positive support for UK SMEs and mid-market companies.”

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