Business loans to fuel growth

Small business loans to fuel growth

Are you an ambitious small business seeking a business loan to help fuel growth?

Then you have come to the right place. Mercia SME Loans can invest in all areas of the UK with a particular focus on the North of England lending between £100,000 and £1million to support growth-focused businesses as they look to scale.

We’re open to new applications from ambitious SMEs seeking flexible business loans.Paul Taberner, MD – Mercia Debt Funds

Business loans for regional SMEs

Business loans from Mercia SME Loans can be used for a wide range of purposes including funding working capital, helping with management team restructures and new hires, as well as funding acquisitions.

We have a niche in funding Management Buyouts. Our focus is on the management and the sustainability of the cashflows of the business rather than the security available. This approach has served us well and the fact that we can fund smaller buyouts this way is a real differentiator.

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What can the funds be used for?

  • Help with working capital
  • To fund restructures
  • Appoint new hires
  • Acquisitions
  • Management Buy Outs

What criteria should my business meet?

  • Three years trading
  • Turnover of  at least £500k
  • Profitable
  • Led by ambitious management teams

How to improve your loan application

Chris Pestell, Investment Director of Mercia SME Loans explains how to avoid the most common mistakes that companies make when applying for funding. As an investment director and former banker who has spent over 30 years liaising with companies seeking loans, it never fails to surprise me how many applications fall short of the mark.

Poorly presented financial data, figures that don’t make sense and unrealistic forecasts are commonplace, but perhaps the main issue is that many proposals lack some of the basic data required to support their case. It’s understandable that start-ups and very small firms might struggle to produce a perfect business plan and a fully integrated set of financial forecasts, but even established and successful firms on occasions present information that can impair their chances.

A poor business plan won’t necessarily result in your application being turned down outright – the fund manager may suggest that you go away to make amends and supply missing data. However, it doesn’t create the best impression of your business and it will certainly delay the application process, therefore it makes sense to try to get your application right from the start.

Are you a looking for debt finance for your clients?

If you are seeking debt finance for one of your clients, then Mercia will be able to help you. We work alongside banks and other lenders providing debt finance for ambitious growth-focused businesses.  We partner with the wider finance community to help our networks complete deals too. So if you work in banking or alternative finance, and need additional funds for your client, then Mercia SME Loans can lend alongside you.


Views from a debt advisor

Richard Mason - Ludgate Finance

What sort of clients do you represent?

“We represent SME clients.  We have a highly specialised approach focused on debt advisory.  Our average client size is up £10 million turnover and Ludgate has been in existence since 2007.   I was a former banker myself and started at NatWest in 1988 and I’ve also worked at HSBC and ABN Amro.”

How long have you worked with Mercia and your investment contact?

“We first spoke with Andy Heaton in 2019 as he’d been recommended by someone we know and trust as a potential funder. We then met Andy shortly after that. It was quickly clear to me that there was something different about the Mercia offering and we liked that. We currently have three deals in discussion, and we completed our first deal in March 2020 just before Lockdown hit.”

Describe Mercia an investment partner?

“The deal we took to Mercia was a fairly complicated MBO and it actually took quite a bit of work getting it across the line. We managed to complete the transaction, a £425k loan, in 20 weeks which, given, the complexity of the deal was a good result.

Most other lenders would have just looked at it and turned it away, but Andy and the Mercia team knew that whilst the company structure might be complicated, there was a great business there which would thrive from the SME Loans fund.

The approach to the transaction was good; we had an onsite meeting in January and the deal came together well from there. In fact, it was because Andy was able to think around the deal, not just be formulaic, that the transaction was successful.

As debt advisors, what we look for in a funder is that they are prepared to work with the lender, a willingness to think outside the box, and Mercia did just that.

I should also add that Mercia rejected a deal which we have introduced and whilst that’s disappointing it certainly hasn’t damaged our relationship with the team. We know that Andy considered the deal carefully and provided clear communication throughout. Perhaps most importantly too, he gave us an early ‘no’ – they didn’t drag the process out and we appreciated the way that they handled it. This is important in a relationship – you need clear and responsive communication and Mercia does this well.

There is a skill and an art in lending. Too many lenders these days lend based on algorithms, but it’s all about relationships and a willingness to think outside the box – in my view this is something Mercia is great at and we’ll continue referring deals to them.”

Views from a CEO

Giles Hampson - Recruitment Management Group

RMG has successfully positioned itself within the recruitment sector as an executive search consultancy. The firm takes pride in recruiting outstandingly talented people who make a significant and lasting impact across a range of sectors including healthcare and chemicals and STEM.

Level of investment received

£300,000 from Mercia’ SME Loans Fund in January 2017 to support at buy-out of the founder-shareholder.

Why did you choose Mercia over other providers of finance?

“As the transaction started life as a vendor-initiated management buy-out (VIMBO) it was actually the founder of RMG who had led the initial discussions with the team at Mercia. Some of the negotiations were already underway by the time I joined the process, but the main thing which impressed me about Mercia was its investment director, Chris Pestell.

Chris gave a deep overview of the process, warts and all. He was really good in presenting the fund proposition, as well as giving practical details about the process itself, including how and why transactions like ours could get into difficulty. Negotiations like this take time and ours took around six months but throughout the process Mercia was really supportive of the transaction and the process itself was seamless.

I keep in contact with Chris now even though he’s not my day to day contact but I’m very grateful to him. Without Chris’ support I wouldn’t have received the investment. My main investment contact now is Paul Ferguson. Paul is great; he’s reasonable and very good to deal with and he’s shown a really flexible approach as a lender.”

What progress has RMG made since the initial investment?

“I’m pleased to say that our sales have strengthened since the investment. The business itself had often hit around £750,000 turnover, but since we received the investment, we have consistently met £1.0million. Of course, this year might be a little different, but we have worked really hard to maintain our sales levels.”

How did the COVID-19 pandemic affect your business?

“It was actually the week before lockdown which was a bit more surreal. We had a few projects stalled and candidates pulled out of roles and nobody really knew what was going on. But we had to maintain our pipeline as we couldn’t have just closed our doors.  In the following weeks we worked hard to maintain our contacts and build the pipeline. We didn’t need to furlough any of our staff or ask for any capital repayment holidays on the loan, so I am pleased with how we have come through the year.

Mercia was really supportive during the period too. Chris gave us some helpful advice about managing cashflow which was great.  I also found the series of webinars they ran excellent; they helped me to think things through and bounce ideas of other people and the sessions run by Patrick Dunne were very reassuring indeed.”

How would you describe Mercia as a lender?

“Mercia is a responsive, straightforward, flexible, and practical lender. The team is open minded, and they operate a robust process. You know you have to prove yourself and the value you can add, there were some tough conversations during the early days of the process, but I actually thought that was useful. The team asked more probing questions than some of the other lenders we had been talking to, so you know you are buying into a professional outfit.”

What advice would you give to other SMEs seeking finance from Mercia?

“The most important thing to consider when assessing a potential lender, is not just the offering and the deal terms, but the people you will be working with as part of this process. See things beyond the actual transaction and try to get a feel for what type of support, challenge and working relationship you are going to have. Like it or not, you will be having plenty of dealings with any lender post transaction, in either an equity or debt scenario, there is often a saying that says “People buy from people”, in this case I believe this can be extended to “people borrow from people!”

“Mercia is a responsive, straightforward, flexible, and practical lender” – Giles, CEO of RMG