Direct lending is the provision of credit directly to small and middle market companies (SMEs) for growth or acquisitions
With banks reducing their supply of loans, new sources of finance have developed. For the smaller loan sizes, peer-to-peer (P2P) and new asset-backed providers have come to play a useful role. Banks have returned to lending markets but the new regulations they operate under, have reduced their relevance to SMEs. The gap that remains has attracted the attention of private institutional lenders
Private lenders are well suited to carry the ball that banks have so dramatically dropped. They are often able to be more flexible than the banks and have 'locked-up' investments from pension funds and insurance companies, therefore able to invest for the long term and be patient
Direct lending by private funds runs at 300-400 transactions annually according to industry figures. This is just the tip of the iceberg as tracking deals with smaller companies is hard to do accurately
From the Financial Times:
European mid-market companies grow more willing to turn to non-bank lenders for financing...
From The Private Debt Investor:
Seventy private debt funds raised $41.59 billion for final closes in the first six months of 2015...
From The Telegraph:
...figures showed the largest drop in small business [bank] lending since records began in June...
The table below summarises the key features of the loans offered by private lenders in the Altimapa Capital network
|Loan size:||€3 to €50 million|
|Maturity:||3 to 7 year (often non-amortising)|
|Cash interest:||3% to 14%, varying with seniority, company and security|
|Structure:||Varying degrees of customisation available: senior or subordinated, |
|Security:||Often secured on the companies' cash flow and asssets|