IW Capital’s pragmatic view on debt finance

By Mark Cameron, head of debt

IW Capital, founded in 2010, is a private investment company facilitating both debt and equity investments into the UK’s high-quality community of growing SMEs. IW has historically specialised in providing equity finance through the Enterprise Investment Scheme, and at the start of 2017 we launched a new product to provide debt finance to UK companies. Having completed our first few deals this year we are looking forward to growing our portfolio over the next 12 to 18 months.

We look to provide debt finance of between £0.5m-3m to established SMEs that require funding to support their business, whether this is for organic growth or development of a new product, an asset purchase, or to fund an acquisition or management buy-in/buyout. IW looks to cater to a market where companies with solid track records are falling into the gap between the mainstream banking market and the nascent alternative finance industry.

Our primary lending product is senior secured debt, but we are open to looking at hybrid facilities or mezzanine funding where a sound business rationale can be demonstrated.

Our preference is to lend to businesses that have demonstrated a level of sustainable profitability, but we’re willing to consider younger businesses and turnarounds where we can see a clear route to profitability. Due to the nature of funding, we don’t have many strict criteria that limit the types of companies we can look at and the type of financing structure we can offer – if the business case is strong, we are generally able to find a financing solution that suits both parties.

Case studies

One of our recent deals was Discovery Yachts, a yacht manufacturer based in Southampton, for whom we provided a loan to enable the incumbent managing director to complete a management buyout of the company and simultaneously fund the acquisition of the business and assets of Southerly Yachts, a renowned yachting brand formerly based in Itchenor.

Given the business has a fairly unique asset base consisting primarily of tooling equipment and yacht moulds, and the fact that the nature of yacht building means that revenue and cash flow can be lumpy, on first viewing it could have seemed challenging for a mainstream lender to support. However, having taken the time to fully understand the dynamics of the business, and with an extremely experienced management team at the helm, we were able to provide the required funding.

At the start of the year, we also provided funding of £1.65mto a pub management group, Inglenook Inns & Taverns, to enable them to acquire a portfolio of 11 freehold pubs from a large regional brewer. We were able to provide the company with a flexible structure that gives them flexibility to undertake further acquisitions and continue to grow their portfolio.

One of the first debt financings we supported was to a concrete block manufacturer in Yorkshire. Our investment model allowed us to provide the company with a hybrid facility comprising both equity and debt finance. A year later, we followed this up with additional debt funding to support their continued growth – demonstrating our commitment to support the company on its journey.

Relationships

Our approach to lending is to build a partnership with the company that enables us to provide a suitable facility in the first instance, but to also support the company on an ongoing basis. We also recognise that all businesses go through challenging periods, and through this approach, we are able to take a pragmatic view when these periods do occur.