Alcentra to buy $1bn of US business loans from Funding Circle

The private credit arm of Bank of New York Mellon has arranged financing to acquire the debt of up to 8,000 companies.

Bank of New York Mellon private credit arm Alcentra and small business financing startup Funding Circle, both based in London, have entered into a partnership to fund US small and mid-sized enterprises.

Alcentra will buy up to $1 billion of loans originated by Funding Circle’s US platform over a three-year period, the two firms announced on Friday. The loans could fund up to 8,000 companies. Financing for the loan purchases would come Credit Suisse.

“With the shrinking of traditional lending channels, businesses of all sizes are facing similar challenges in securing financing,” David Forbes-Nixon, Alcentra’s chairman and chief executive officer, said in a statement.

Funding Circle, founded in 2010, has raised $413.2 million through eight funding rounds from various venture capital funds. Among those commitments was $40 million in debt financing from British Business Bank, according to Crunchbase. In addition to US companies, Funding Circle also backs businesses in Germany, the Netherlands and the UK.

Earlier this year, Alcentra built out its US credit team, hiring Peter Glaser and Suhail Shaikh as managing directors and co-heads of US direct lending. The men will report to Vijay Rajguru, global co-chief investment officer of the firm.

Glaser and Shaikh were also appointed co-presidents of the Alcentra Capital Corporation, the firm’s business development company, while Vijay Rajguru was appointed chief executive of the vehicle, replacing David Scopelliti.

Alcentra is currently in market with Alcentra European Direct Lending Fund III, which is seeking €3 billion-€5 billion across both unlevered and levered sleeves, according to an investor presentation from Telos, a German advisory firm. The vehicle’s unlevered portion will target a net internal rate of return of 7-9 percent and a net cash multiple of 1.25x-1.35x, while the fund’s levered part will target a 10-12 percent net IRR and a 1.4x-1.5x net cash multiple.