Connection Capital, a specialist private client investment business, is enhancing its private debt solution to meet growing demand from SMEs for flexible finance options to fund growth and support business strategy.
The private debt offering, which was launched last year, will now fund financing requirements of GBP3-10million – up to twice its original level of GBP2-5million. This will provide more small and medium-sized businesses with an alternative to bank lending or equity investment which can be tailored to fit their specific needs.
Connection Capital has already completed almost twice as much private debt lending this year as the previous year, and has also added to the expertise and capacity of its private debt team.
Connection Capital considers applications for finance for any purpose, including equity release, growth capital, or acquisition funding. As well as conventional loans where businesses make regular repayments over a fixed period, it can also offer innovative structures which typically fall outside the remit or capabilities of traditional debt providers.
For example, loans which require a single final bullet payment, enabling cash generated to be deployed within the business eg. to fund capex rather than using it to pay down debt, or ‘cov-lite’ opportunities, which are subject to less restrictive covenants.
Stephen Catling, Head of Private Debt at Connection Capital, says: “Our aim is to be the most flexible source of private debt funding in the market for small businesses, and SMEs are responding very positively to our approach.”
“We are seeing clear and growing appetite for this kind of funding from small businesses.”
“Whether businesses are looking for full uni-tranche funding or mezzanine finance, we don’t impose any constraints on our lending criteria: we prefer to evaluate and structure each opportunity based on its own merits and requirements.”
“For small businesses used to banks’ standard, rigid terms, that’s incredibly refreshing. We can accommodate a variety of needs where traditional lenders often can’t. Likewise, we don’t need these opportunities to be in super-high growth businesses or the kinds of “hot” sectors that private equity investors often tend to look for.”
Catling adds: “Getting access to banking lending remains problematic even for many strong, successful SMEs. Since they are too small for the big debt funds to get involved with, there is real need for other options to fund growth ambitions or underpin on-going business development.”
“On top of that, not all businesses are looking for private equity investment, for example because the nature of their shareholder structure does not permit it or because it would not fit with the company’s future plans. Essentially, we are targeting good quality, solid UK-based businesses. If the underlying credit is robust, and the company has either regular, dependable cash flow or strong assets, then we’ll consider it.”
Connection Capital’s private debt solution complements its private equity arm which provides investment funds to SMEs. It also offers commercial property and alternative asset fund investments.
