High street bank Santander has launched a £200 million mezzanine debt fund that will compete against the Business Growth Fund in making investments to high-growth regional UK companies.
High street bank Santander has launched a £200 million mezzanine debt fund that will compete against the Business Growth Fund in making investments to high-growth regional UK companies.
The bank, which quit as a backer of the £2.5 billion Business Growth Fund in May this year, has launched the new programme Breakthrough that will target companies eyeing growth outside of London and the South East. The programme is in addition to the bank’s funding commitments as part of Project Merlin, a scheme which aims to improve access to finance for smaller businesses.
The loans are available to businesses with an annual turnover of up to £10 million that have a demonstrated history of high year-on-year growth in turnover, profit or employment. The programme will be delivered regionally with the support of regional boards.
Santander hopes to attract companies away from the government-backed growth fund because instead of offering solely equity investment, this will take the form of a mezzanine loan. These loans are generally a cross between equity and debt finance.
The bank has attracted £50 million for the fund from the government’s £1.4 billion Regional Growth Fund, while the remaining £150 million will be committed from Santander. The bank received the funding as part of the £1.4 billion fund’s second round of recipients announced in November.
Santander executive director of corporate, commercial and business banks Steve Pateman says that the Breakthrough programme will offer support services, advice and grants for research and development, in addition to financing.
Pateman comments, ‘We know that there is a recognised funding gap for companies with a turnover of under £10 million looking for growth capital, and we want to help fill that gap. This is part of the role that banks can play in supporting a private sector-led recovery and stimulating local economic growth.
‘It is not just money that drives business growth – but the people behind the business. We know from our own experience how challenging growing a business can be and that is why we are providing a comprehensive package of support to assist British business owners in the steps they are taking to invest in and grow their business.’
Santander’s mezzanine fund will compete for business directly against the Business Growth Fund, which has offices in Edinburgh, Birmingham and London, and aims to invest between £2 million and £10 million in small and medium-sized enterprises (SMEs) that have sales between £10 million and £100 million a year. It is backed by Barclays, HSBC, Lloyds, RBS, and Standard Chartered, and was launched after a number of government reports found SMEs were not receiving enough capital.
In October, Benefex, a provider of online employee reward and benefit schemes, became the first UK company to receive backing from the bank-backed Business Growth Fund, securing £4.2 million in growth capital.
