Mercia secures £20m for SME debt fund first close

The fund is backed by Greater Manchester Pension Fund and will particularly focus on businesses in the north of England.

UK-based lender Mercia has launched a debt fund with a target of up to £40 million ($51.2 million; €43.6 million) to invest in loans to SMEs.

Mercia SME Loans will provide finance for ambitious regional businesses in the UK to help them grow as the economy recovers from the effects of the coronavirus pandemic.

The fund is backed by Mercia’s existing investor, Greater Manchester Pension Fund, which has been backing its debt and equity funds for more than 15 years. GMPF provided £20 million for the first close and is currently the only investor but further commitments from other investors may follow.

Mercia can lend between £100,000 and £1 million to fund working capital, acquisitions, capital investment and management team restructuring or buyouts and can invest in all areas of the UK but with a particular focus on the north of England.

The vehicle has a five-year investment period followed by a five-year realisation period.

The firm launched its first SME debt fund in 2015 and backed a total of 52 businesses including Harrogate Spring Water and Rosehill Polymers.

Paul Taberner, managing director of Mercia Debt Funds, said: “Mercia SME Loans backs profitable and ambitious SMEs that are reigniting growth plans stalled during the first part of this year.  We’re already seeing a strong pipeline of new deals as the regional economies start to recover and we hope initiatives like the launch of our new fund will stimulate even more growth as the country fights back to recovery.”