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Beechbrook Capital holds second close of third UK SME fund

16 November 2022

16 November 2022 – Beechbrook Capital, the specialist direct lender, announces the second close of its third UK SME Credit Fund, with commitments of more than £170m, including the fund and managed account commitments. The fund supports small and medium-sized businesses throughout the UK regions with turnovers of between £10m and £100m and EBITDA of more than £1m.

The fund has already completed its first seven investments, deploying c. 50% of current commitments. The investments are diversified by sector and across the UK regions. There is a strong pipeline of further investment opportunities as firms are seeking to grow, make acquisitions or refinance.

Among the institutional investors that have made commitments to the new fund are British Business Bank Investments Limited, the commercial arm of the British Business Bank, Greater London Authority Strategic Reserve, Greater Manchester Pension Fund and Strathclyde Pension Fund. Beechbrook will hold its final close in the second quarter of 2023 with a target fund size of up to £300m.

The UK SME Credit Funds provide senior secured loans to predominantly non private equity-backed businesses to support acquisitions, buy-outs, shareholder re-alignments and general expansion plans. It is estimated there are around 30,000 UK businesses in Beechbrook’s chosen target range. The fund provides loans of between £5m and £25m.

There remains a scarcity of capital in the lower mid-market as banks continue to retrench and most alternative lenders raise mid-market focused funds.

The UK fund has a highly experienced management team, headed by Jon Herbert, managing director, who has 35 years of relevant experience. He joined Beechbrook over seven years ago to launch the UK-focused strategy.

Jon Herbert is supported by dedicated investment teams in London, Manchester and Birmingham. Beechbrook’s regional office network and embedded local relationships enhance origination and proprietary dealflow.

Also supporting the team is a highly experienced Fund Performance team, led by Steve Morris. The team focuses on portfolio management and value creation, working with investee companies and their stakeholders to deliver successful outcomes for the fund.

The fund builds on Beechbrook’s existing stable of private debt funds, which invest in lower mid-market businesses in the UK and northern Europe. The existing private debt funds have raised over €1bn to date.

Beechbrook managing partner, Paul Shea, commented: “The third UK SME Credit Fund is off to a great start, both in terms of fundraising and deployment. We’re delighted with the progress the strategy has made over the last seven years and the financial support we are providing to regional UK SMEs. Given the expected economic headwinds we will remain cautious but active throughout the cycle. We will continue to be selective and aim to deliver attractive risk-adjusted returns and yield for our investors.”

Beechbrook Capital