FUNDING
The Merseyside Loan and Equity Fund provides funding from £50k to £2m by way of loan, mezzanine and equity finance.
It invests in established businesses based on Merseyside and its main focus is to enable businesses to expand. Funding can be used to finance asset purchases or provide working capital to service new contracts. Management Buy Outs (MBOs) and acquisitions will also be considered.
Further information is detailed below:
Loans
The Merseyside Loan and Equity Fund offers loans of between £50k and £150k. Loans can be taken on a 3 – 5 year basis and we apply a fixed interest rate which is currently between 7% and 10%.
In some cases loans may include a premium option where a lump sum is attached at the end of the repayment period. Directors’ personal guarantees will normally be required unless there is tangible security available within the business.
Unlike MSIF’s previous funds match funding is not required. However, as we may not always be able to provide the full amount of money your business needs, it may be necessary to seek additional finance from another provider. In addition we no longer require a company to create jobs in order to provide funding.
Mezzanine Finance
We offer Mezzanine investments of between £150k and £500k. Mezzanine investments bridge the gap between traditional bank lending and equity finance. It can be used as a stand alone product or alongside an equity investment to create a tailored package. Mezzanine funding is debt funding (eg. a loan) with a premium or equity option attached upon repayment.
Mezzanine finance is usually used when traditional lenders eg. banks/invoice discounters will not support a business or security is not available. As Mezzanine funding relies upon cash generation for its comfort, if a company can demonstrate a positive cashflow forecast then a Mezzanine loan can be used. Mezzanine funding is very suitable for businesses which are looking to expand where sales build up is considered strong but will take time. It can also be used for MBOs and acquisitions.
Equity Funding
We provide equity funding from £500k to £1.5m. Equity investment is most likely to be suitable for major growth projects or MBOs which are considered too high risk for debt only funding, and provides capital in return for a shareholding in the company.
The size of the shareholding will depend on a number of factors including the current value of the business, how much capital is required and the level of risk in the company’s growth proposition. Whilst equity funding does mean relinquishing shares in a business, its aim is to significantly increase the value of the company. This means that whilst the original stakeholders’ shareholdings are diluted, their stake will potentially be worth a lot more.
The nature of equity funding means that the financer will at some point want to sell their share or ‘exit’ to make a return. As a rule of thumb, we will look to invest in companies where there is a realistic prospect of an exit within 3 to 5 years, and where we would expect the value of our investment to double at least in that timeframe.
Additional Support
In addition to providing finance, we help to strengthen the businesses we invest in by providing our own in-house expertise. MSIF has its own dedicated portfolio management team which works closely with our clients to help them develop and grow. Our portfolio managers are very experienced at working with SMEs and their support can mean the difference between a business failing or being successful. They are on hand to help if your business has any issues it needs to overcome or provide simple advice such as making you aware of any support services which might be useful to you.
Where we have invested through mezzanine or equity finance, we will usually also appoint a suitable non executive to provide valuable knowledge and skills to strengthen the existing management team. We have a wide network of experienced non executives from various backgrounds which we can appoint to complement our clients existing directors.