EXCLUSIVE: IW Capital, the alternative investment house, plans to offer up to £200 million worth of debt funding to small business a year.
The news will be welcomed by entrepreneurs, giving them another alternative to high-street bank lending.
Crucially, IW Capital is opening up its new debt fund to private investors, with a £10,000 entry point for individuals who want to lend to SMEs.
The financier entered the debt market a year ago and has lent £10 million to date, compared to £3 billion for OakNorth and £400 million for ThinCats.
Typically, it lends between £1-3 million to SMEs over a three-to-five-year period. Entrepreneurs pay around 9 per cent interest on the loan.
Luke Davis, CEO and founder of IW Capital, said: “Debt is the other end of our risk profile. It’s for companies typically that are 10 years or older and are growing both from a revenue and Ebitda point of view. The money could be used for management buyouts, buy-ins or to refinance.”
Next IW Capital plans to launch a £10 million debt fund, followed by a £20 million iteration.
Davis said: “We’re just building up our traction and internal processes, but there’s a lot of interesting companies out there. Banks aren’t interested in lending to the size of businesses we’re looking at. We’re growing quite quickly at the moment, both in terms of money we can deploy, and resources are bringing in.”
IW Capital’s debt fund offers private investors potential returns of 8 per cent compared to 1.09% on a two-year average fixed deposit rate.
Davis said: “We are beginning to see a change in perceptions of investors in the UK. Previously the view had been investing is reserved for the very wealthiest of society, but debt funds have opened it up for retail investors. These individuals are financially empowered and are looking to use their capital to support British business instead of leaving it in the bank, taking pride in this share of the future-proofing of our economy driving private sector.
“Our offering not only allows businesses to secure funding at rates that would otherwise be unavailable from most traditional banks or lenders, but also gives investors the opportunity to make the most of their capital in a time of historically low interest rates.”
According to research from The UK Business Angel Association, 81 per cent of people have over £10,000 in investable assets outside of their residential property or workplace pension.
IW Capital was launched in 2009 to capitalise on the Enterprise Investment Scheme (EIS) tax break rising from 20 per cent to 30 per cent. EIS encourages private investment in growth companies.
In addition to EIS, IW Capital offers venture capital and private equity in tranches of up to £10 million.
Davis said: “We’re looking for interesting companies with innovative ideas and strong management teams that lack the funds to move forward.”
It has raised £75 million to date, of which £65 million has been through EIS venture capital and private equity.
“Our ambition is to do more deals and larger deals with companies that make a difference,” said Davis.
“With our private equity investments, they’re more established and the risk profile is perceived to be less.”
“We’ve got everything really as far as risk profile is concerned from the senior-secured lower risk to venture capital equity and different products in the middle.”
IW Capital has around 10,000 investors on its database.