Beechbrook Capital has announced the first close of its inaugural UK SME Credit Fund, with commitments of more than £100m.
The fund will support small and medium-sized businesses in the UK with a turnover of between £10m and £100m and EBITDA of more than £1m.
Among the institutional investors that have made commitments to the new fund are British Business Bank Investments Limited, the commercial arm of the British Business Bank, and the European Investment Fund.
With additional investments to the fund already pledged, Beechbrook expects to hold a second close in the second quarter of 2016 with a target fund size of up to £200m.
The UK SME Credit Fund will provide mainly senior secured loans to non private equity-backed businesses to support acquisitions, buy-outs, shareholder re-alignments and general expansion plans.
It is estimated there are around 40,000 UK businesses in Beechbrook’s chosen target range. The fund will provide loans of between £3m and £15m. There is already a strong pipeline of investment opportunities, with the first investment expected to complete early in the New Year.
The fund builds on Beechbrook’s existing three private debt funds, which invest in lower mid-market private equity-backed businesses in the UK and northern Europe. The existing private debt funds have raised €251m to date.
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The UK SME Credit Fund has a highly experienced management team, headed by Jon Herbert, managing director, who brings 30 years of relevant experience.
He was formerly a director of LDC, where he set up the in-house debt advisory function, and before that head of Lloyds Acquisition Finance which included responsibility for sourcing, executing and managing leveraged loans in the SME market.
Herbert is supported by Tim Johnston, who has been with Beechbrook since 2009 and Peter Kirtley, who was formerly investment director at Lloyds Banking Group with responsibility for negotiating, project managing and executing debt for equity transactions.
Beechbrook managing partner Paul Shea said: “The UK SME Credit Fund is a natural evolution for Beechbrook. We are pioneering this type of funding to UK SMEs.
“We have received numerous requests for it from family and manager-owned businesses around the country, which are acutely aware of the shortage of long-term development and expansion finance currently available. Other credit funds in the market generally target larger companies or focus specifically on private equity-backed buy-outs.”
Peter Wilson, CEO of British Business Bank Investments, added: “We have supported Beechbrook and its experienced management team for a number of years through our investment programme and we are particularly pleased to have invested in its latest UK SME Credit Fund.
“The Fund’s focus on non private equity-backed SMEs will help address the well-publicised funding gap for loans between £3m and £15m and is in line with our aim to support diverse debt finance markets.”
Specialist advisers Ian Milton and James Newsome of Arbour Partners will continue to advise Beechbrook on fundraising for the UK SME fund’s final close.