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Introducing our enhanced Private Debt offering

29 November 2018

Connection Capital enhances specialist private debt solution to meet growing SME demand for flexible finance

  • Innovative debt packages of up to £10m now available, with no constraints on lending criteria
  • Connection Capital doubles amount lent in 2018 compared to previous year

Connection Capital, the 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 innovative private debt offering, which was launched last year, will now fund financing requirements of £3-10million – up to twice its original level of £2-5million. 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 aims to be most flexible source of SME private debt in the market

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 e.g. 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 can either be the sole provider of finance or work alongside other equity sponsors on a deal-by-deal basis. For example it has provided:

  • £2.6m in short-term secured private debt facilities to Barnett Developments, the developer behind a new high-spec residential property development in central Belfast. The funding was required to enable Barnett to finish the units to a higher specification than originally planned and to release equity so that it could pursue additional developments in its pipeline.
  • £3.5m of sponsorless mezzanine finance behind a commercial mortgage, to support the MBO of Torquay Leisure Hotels, a unique multi-hotel and leisure complex resort in one of the UK’s top tourist destinations. Connection Capital provided the capital that exceeded the mortgage provider’s appetite, and where private equity would demand too much dilution of the management team’s shareholdings.
  • £4.75m mezzanine funding package, working with a sponsor, for leading global oil & gas consultancy EPI Ltd to pursue strategic M&A and organic growth opportunities, and to replace its existing senior debt. This freed the business from an inflexible banking covenant regime and allowed it to diversify its service offering, expand its reach and strengthen its market position as the market recovered.

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.

 Russell O'Connor
07760 282 586 or Email