As small and medium-sized businesses are finding it increasingly difficult to secure financing from High Street banks, they are being forced to look for alternative methods of raising capital to fund expansions or new contracts.
Palio Capital Partners this week announced that it is planning to offer senior debt and mezzanine loans to companies with a value of between £10 million and £100 million in a move which has already been approved by the The European Investment Fund (EIF).
Mike Henebury, who founded Palio and is currently the company’s CEO, believes they are filling a gap in the market, adding that the lack of finance for SMEs is having a very damaging effect on the UK economy as a whole. He went on to welcome the new government initiative, the Business Finance Partnership, which aims to make £1 billion of credit available to UK companies through managed funds.
Palio’s SME financing team will be lead by CIO Jerry Wilson alongside a group of experienced professionals who between them have arranged senior and mezzanine loans to more than 80 British firms, totalling almost £3 billion. Backing from the EIF is an indication of the financial clout that Palio offers, while Mr Wilson believes that investors will be able to benefit from this opportunity just as much as the SMEs themselves.
He added that private equity deals involving small and medium-sized businesses have trebled to almost £3.5 billion since 2009 and he foresees no trouble attracting investors to the new flexible loan scheme – benefitting SMEs and the UK economy at the same time. Wilson went on to say that the strong demand and weak supply when it comes to business financing is sure to attract investors looking for a healthy return on their initial outlay.
In the first stage, Palio is planning to lend only to those SMEs with an experienced manager at the helm, able to attract interest from private investors. The initial hybrid loan portfolio is expected to be worth around £250 million, with plans for further increases if there is market demand from both investors and SMEs.