Beyond the banks - credit funds provide a boost to private businesses

The recession and subsequent benign economic conditions in the UK have meant that many private company shareholders and management teams have not necessarily felt able to achieve all their ambitions for their businesses. The contraction in bank lending since 2008 has meant that strategic aims such as growth into new markets, capital investment and paying of dividends or bonuses have not been possible for many businesses over the last few years. But these are now firmly back on the agenda.


Now that we are in a period of more sustained business confidence, many entrepreneurs are turning their minds to what they want to do with their businesses through the next part of the cycle. This re-evaluation of options is coinciding with a much improved debt funding environment.


Credit fund flexibility

The UK mid-market has traditionally been funded by the main commercial banks. However over the last few years this has changed drastically with a large number of UK mid-market deals being funded by new “credit funds”. These have raised significant amounts of funding from their investors, keen to deploy capital into the UK. Credit funds have far more flexibility in the way they structure debt capital with longer tenors and less rigid repayment regimes, meaning their financing can be really attractive to businesses looking to invest.


This combination of increased levels of debt liquidity and a more positive economic outlook means that business owners are now able to consider their future options much more strategically, knowing that there is a higher likelihood of them being financeable.


Debt financing more commonplace

For example, debt financing of dividend recapitalisation transactions, which has been commonplace for private equity owned companies for many years, is now available for businesses in private ownership. Using debt to fund a special dividend or share reorganisation is becoming more common for private companies. This gives owners the option of staying in control of their businesses whilst de-risking their personal position by taking some money off the table now.


This positive environment is a boost for shareholders who are seeking an alternative to the traditional approach of partnering with external investors.


How are you financing your ambitions and strategy for your business? What options have you considered? Share your thoughts below or schedule a meeting to discuss your situation in confidence.

Paul Ambrose |  Debt & Capital Advisory Director
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