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Investment focus

Private Debt

Looking to invest?

Investing in debt offers a lower-risk exposure to private companies. Returns are usually through fixed income payments and often have some security against assets.

  • 1.5-2.5xtarget net returns
  • 9-15%annual yield
  • 1-5year duration

Investing in private debt

UK SMEs are turning away from traditional bank lending to grow their business. After the financial crisis in 2008, high-street lenders began to reduce their exposure to this area of the market. The global pandemic has further accelerated this trend, with a 10% reduction in ‘normal’ lending in 2020.

This has created an excellent opportunity for private wealth and alternative debt providers to step in and cherry-pick the most appealing opportunities. These are typically in companies with a positive trading track record, good management, robust plans and a combination of low gearing and/or asset security to support attractive returns for the level of risk being taken. 

We focus on high-quality SMEs, with professional management, strong cashflows and a credible exit plan for the debt package we provide. We can offer finance of between £3m - £10m across the debt risk/return spectrum, from senior debt all the way through to mezzanine finance. And, we will always seek to secure equity participation, where possible, in order to target any capital growth.

Investments are structured to suit each business and there are no predefined constraints imposed.

We also provide debt to residential property developments, in uni-tranche or mezzanine formats. This is typically at the later stages of development, when value has become embedded, and often will be to enable a developer to generate an early release of anticipated profit from a development.

Access to this asset class is not easily available to private investors, but through Connection Capital you can choose to invest in whichever of our private debt opportunities you wish, in multiples of £25,000. 

Private debt investment structures

Our private debt investments take the form of debt instruments with a combination of paid and rolled interest, along with warrants or other mechanisms to secure value upon redemption or the ultimate sale of a company.

There is no ‘one size fits all’ and we work with targets to determine the best overall package depending on the individual circumstances of each transaction.

Our track record in private debt

We have completed 10 private debt investments, seven supporting UK companies and three supporting property developers.

We are willing and able to support all our investments, whether labelled equity or debt, with access to our network of clients and we look for each company to embrace the benefits of an independent director and the toolkit of measures which are available via our private equity heritage, to the benefit of all shareholders.

Our SME Investment Team

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