Invoice Financing Provider Expands Asset Based Lending Facilities for UK SMEs
Spring Ventures, a private equity investor specialising in management buyouts of UK companies with strong growth potential, today announced that it has backed a group of experienced commercial lending professionals to buy invoice financing provider, IGF Invoice Finance Limited (“IGF”), from Greater London Enterprise (GLE).
Spring Ventures will initially invest £9m to fund the acquisition (buy-in management buyout) and provide growth capital. It will commit a further £11m of follow on capital over the next three years and will take a majority stake.
The management buyout team includes John Onslow, John Nelson and Jon Hughes who collectively have 60 years experience in the commercial lending sector. Matthew Cooper, co-founder of Capital One Bank and former NEC of AIM listed Inspired Capital, has also been appointed as Chairman.
New CEO John Onslow has previously grown and sold two asset based lending businesses including Centric Commercial Finance (sold to Shawbrook in 2014) and Heller Finance (acquired by GE in October 2003). John also served as Chairman of the Asset Based Finance Association.
IGF will lend up to £5m to meet the growth aspirations and working capital needs of UK SMEs with revenues up to £100m. The facilities may also be used to support re-financings, mergers and acquisitions, management buy-outs and buy-ins, restructurings, and turnaround situations. IGF currently has a portfolio of c. 200 clients and a loan book of £20m; and supported small businesses with total sales volume of more than £300m in the year to March 2015.
Established in 1997, the company is headquartered in Tonbridge, Kent and currently employs 38 people. Following the investment, the business will hire additional staff and expand its national presence across the UK.
Matthew Cooper, new Chairman of IGF, commented:
“Against a backdrop of continued demand for SME funding, this is a very exciting opportunity to take a relatively small invoice lending platform and grow it into an asset based lending business of significant scale. Aside from bank lending, there are still very limited credit facilities available for smaller businesses. Our model provides a solid way to deliver flexible forms of funding to SMEs and I have every confidence that we will increase the size of our loan book from £20m to £300m in three years.”
John Onslow, new CEO of IGF, said:
“In Spring Ventures, we have found an investor that will give us the financial firepower to take IGF into exciting new areas as well as increase our national presence. The asset based lending market is growing fast. It is still dominated by the high street banks who would in general rather invest in larger, lower risk opportunities and this in turn offers enormous potential to smaller more flexible providers like IGF to fill a gap. With 5 million SMEs in the UK currently employing some 15 million people and accounting for 50% of the economy, there is a very significant funding gap to be filled.”
John Hudson, Managing Partner at Spring Ventures, who joins the IGF board added:
“This deal gives us an attractive opportunity to back what we believe is the strongest team in the asset based lending sector. Due to the complexity of the business, few operators have the credibility to provide a full range of asset based loans at this end of the market. The IGF team have proven experience of building successful lending businesses and we very much look forward to working with them to create a major new provider of asset based lending to SMEs.”
According to the bank of England, the UK SME lending sector is estimated at £175bn of which £20bn relates to invoice finance and other types of asset based finance. Although post-recession SME lending by banks has declined by approximately 25% from its peak, the asset finance sector has grown strongly at a rate of c. 6% p.a. over the last 5 years and now has total funds in use of approximately £20bn.
In total c, 45,000 businesses in the UK and Ireland used asset based lending in 2015 (Asset Based Finance Association).
Advisers to the transaction:
For Newco:
Shoosmiths – legal advisers
RSM – financial DD provider
Ashcombe Advisers – commercial DD provider
For Management:
SamCorp – management advisers
Fox Williams – legal advisers
For GLE:
Clearwater – corporate advisers
MBM Commercial – legal advisers