Beechbrook holds first close with £120m for SME lending

The firm’s third SME fund has received backing from new and existing investors, including £30m from British Business Investments.

London-based lender Beechbrook Capital has secured £120 million in commitments for its third UK SME fund.

The capital consists of £85 million for the commingled fund and an additional £35 million spread across two separately managed accounts.

Returning and new investors took part in the fundraising including British Business Investments (which made a £30 million commitment), Greater London Authority Strategic Reserve and Greater Manchester Pension Fund.

Beechbrook has yet to set a target for the fund but has a hard-cap of £400 million and will continue fundraising for the next 12 months.

The fund follows the strategy of its predecessors, investing in small and medium-sized businesses in the UK that have a turnover between £10 million and £100 million and EBITDA of £1 million or more. It will provide mainly senior secured loans to non-sponsored companies to support acquisitions, buyouts, shareholder realignment, re-financing and other expansion plans.

It has a three-year investment period followed by a five-year runoff and the option for extensions, and expects to make approximately 20 loans depending on fundraising.

Paul Shea, managing partner of Beechbrook, said: “Given the uncertainty created by the pandemic, providing flexible financing for SMEs is more crucial than ever. 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.”

Beechbrook said it has a strong pipeline, with two deals expected to complete during Q1 2022.