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Thrive is set up by Funding London, a venture capital company bridging the finance gap for early stage businesses based in London. With over a decade’s experience in supporting the startups of London through a variety of funding vehicles, Funding London sensed a need to illuminate the ever-evolving scenario of London’s early stage businesses.

Thrive features interviews with and opinion from budding entrepreneurs, investors and industry experts. A mix of contributors from all areas of the industry is desired in order to spark genuine discussion about ongoing critical issues. While it showcases the effectiveness of successful ventures, it also encourages sharing lessons learned from missteps and unsuccessful projects.

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Investment · 3 August '20

When to choose term debt finance?

 

Since The FSE Group’s inception in 2002, they have operated at the heart of the SME community, serving innovative, ambitious and scalable businesses who are unable to source funding from conventional or even alternative funding channels, to support their growth ambitions.

Many SMEs in the process of trying to scale-up their individual businesses, may not be at a profitable stage. Term debt finance may be an appropriate solution for early-stage revenue-generating businesses, or established businesses, helping to bridge the market funding gap. The FSE Group is one of very few early stage business Term Debt Finance providers.

The groups team of experienced SME lenders has a proven track record in their field. Eligible SMEs will work closely with their dedicated Fund Manager throughout the process to secure funding and this support will remain post investment.

What term debt finance is available to London SMEs?

The Greater London Investment Fund (GLIF) comprises of a debt portion of £55 million, targeted at businesses in London who are embarking on viable expansion plans. The FSE Group manage the £55 million GLIF debt fund on behalf of Funding London.

The GLIF Fund supports the SME finance gap for the Greater London region and is made up of monies from the European Regional Development Fund (ERDF), The European Investment Bank (EIB) whilst being supported by The Mayor of London. The debt fund (GLIF) is managed by The FSE Group on behalf of Funding London.

The fund looks to support growing and innovative SMEs with Term Debt Finance, to fund activities in various sectors identified as important for the capital’s economy, as stipulated by the Mayor in his Economic Development Strategy. These include cultural and creative industries, financial and business services, life sciences, low carbon and environmental goods and services, tech and digital, and tourism.

What is term debt finance and when to choose it?

As an SME owner, to assist them in taking their business to the next level and to grow, term debt finance may be an appropriate option. Equity funding may not currently be suitable as there could be concerns about equity dilution. In this instance, businesses may wish to consider term debt finance as an appropriate alternative to equity funding.

Selecting term debt finance could help SMEs to drive the top line hard. Many SMEs may have achieved commercial traction with a carefully detailed path to profitability.

This may, in turn, lead to the business receiving a better turnover led valuation at a future equity funding round if they wished to pursue that avenue.

The way in which The FSE Group operate differs from conventional funding channels. They are a higher risk debt lender who will look at each SME on an individual basis, using business plans and projected future revenues, to gain an insight into the business, rather than historical accounts which often is the case with conventional funding channels. Typically, such SMEs may have already received seed equity enabling them to take their product or services to market and started to generate revenue.

By understanding the direction and business goals of the individual SME and its clear expansion and growth plans, if eligible,  term debt finance could enable businesses to make that financial? step-change finance? to achieve the next level of growth for the business.

In order to be eligible, there are certain criteria that the Fund Managers will require SMEs to meet:

  • The product or service can demonstrate strong market traction. By this we mean that the product has already been successful, there are sales with a credible sales pipeline to a cash break-even point
  • The Business has revenue/income in excess of the debt sought
  • The Business is in a position to be able to service that debt

A pre-application form can be downloaded from the website.

https://www.thefsegroup.com/fund/greater-london-investment-fund-glif/

How would an SME use term debt finance?

The FSE Group have rules in place to stipulate the requirements of how term debt finance should be utilised within the business.  Funds can be used for expansion related activities which will deliver substantial growth impact with the Greater London region. Such activities include:

  • People – job creation and investment in people with up to 6 months’ worth of salary supported from the fund boosting the local economy within the region
  • Investment in Sales and Marketing to help increase brand awareness and entering into new markets
  • Research and development activities to help grow and expand the businesses
  • Exporting abroad
  • The purchase of new equipment