Venture Debt: Shawbrook Bank launches new loans to growing SMEs

Shawbrook's head of Growth Capital has launched a new venture debt option for growing businesses.

As the number of start-ups in the UK continues to grow, the ways to fund that business does too.

You might be forgiven that one more instrument to fund growth is one too many.

However, one challenger bank is claiming to offer a venture debt loan for fast-growing businesses – an emerging funding option.

What is Venture Debt?

Venture debt is a short-term loan designed to compliment equity financing by protecting entrepreneurs from too much equity dilution. Businesses are charged interest on the loan and are required to make repayments from one to three years.

Shawbrook’s Growth Capital division is looking to loan out around £100 million over three years to growing firms in the UK in individual loans of around £1 million – £10 million.

According to Forbes, venture debt is so unusual it isn’t tracked by the National Venture Capital Association but Shawbrook is looking to bring it into the mainstream.

Shawbrook Bank, which has been in existence since 2011, is private equity owned and wants to offer loans to businesses who are at Series A stage but need funding to grow between rounds.

Shawbrook’s venture debt offer

Head of Growth Capital, William Chappel, an affable man, says that Shawbrook will offer an alternative deal than rival Silicon Valley Bank are currently offering. The general market standard for venture debt is 15 per cent. ‘Venture debt isn’t cheap,’ he says, although remains tight-lipped on Shawbrook’s firm’s rate of repayment interest.

Chappel is scoping out the serviced offices in London for growing businesses in the tech sector is bullish on future prospects for UK tech companies, especially in London.

‘You look at Shoreditch and it’s such an international area… it’s buzzing. Fintech is a growing sector and the next year will be key for the sector.’

Chappel has form in advising on high profile exits, including Shazam and Onefinestay when he was at the corporate banking division at Barclays. After that role he moved to HSBC as a Director and lead corporate banker in the technology sector.

What is Shawbrook Bank?

Challenger bank Shawbrook agreed to a £861 million takeover in June 2017 by Marlin Bidco, a company jointly owned by funds managed or advised by private equity firms Pollen Street Capital and funds advised by BC Partners. Its Growth Capital division currently employs currently three people, including Chappel and is forecast to grow to around eight by next year.

Michael Somerville

Michael Somerville

Michael was senior reporter for from 2018 to 2019.

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