Beechbrook hits £128m first close for UK SME fund

UK-based direct lender Beechbrook Capital has held a first close on its second UK SME credit vehicle at £128 million ($168.1 million).

Beechbrook’s UK SME Credit II fund is the follow up to its 2015 vehicle which closed on £152 million in February 2017. UK SME Credit I made its final investment in S:CRAFT, a UK B2B distributor, in mid-December last year, bringing the fund’s portfolio to 15 companies.

The fund has a target of £200 million and Beechbrook hopes to complete its fundraising over the course of 2019. It will have a three-year investment period and a five-year drawdown period.

It will adopt a similar strategy to its predecessor, investing in small and medium-sized business in the UK with annual turnover of between £10 million and £100 million and an EBITDA of at least £1 million.

It will focus on funding companies that are not backed by private equity, providing mainly senior secured loans to support acquisitions, buy-outs, shareholder re-alignments, refinancings and other growth projects.

Fund investors include a mix of repeat and new institutional investors. This includes British Business Investments, the commercial subsidiary of the British Business Bank, which also invested in the predecessor fund.

Paul Shea, partner at Beechbrook, said: “We are delighted with the support we have received from both existing and new investors. There remains an acute shortage of development and expansion finance available in the UK lower mid-market and we will continue to play our part in helping fund growth in this important segment of the market.”

UK SME Credit II has already made its first two investments. It backed Exeter-based Hosted Desktop UK, a cloud computing provider, to support a shareholder realignment. It also provided capital to London-based B2B marketing agency Gravity Global to support its growth strategy.