Spotlight on – our debt funds

1st December, 2020

Under the excellent leadership of Paul Taberner, our debt teams have made solid progress over the last six months and despite the economic backdrop they have continued to lend, seeing some of their busiest ever weeks during September and October. The drivers behind this growth are initiatives which the Group has been working hard to bring to fruition over many months.

There is no doubt that COVID-19 has created an unexpected stimulus in demand for debt finance, but the underlying driver behind our growth has been the initiatives that we have been working on for many months. Our debt funding has been critical for businesses that are successfully mitigating the challenges of this pandemic or indeed have experienced positive trends upon which they seek to capitalise.

In April 2020, we announced an extension of our Northern Powerhouse Investment Fund (“NPIF”) debt mandate that was increased by c.£30million taking that debt fund alone to over £80million. NPIF is playing a really important role in helping to unlock the potential of small businesses and we are delighted to build on our successful partnership with the British Business Bank (“BBB”), as together we continue to realise the value in the regions.

In May, we announced our accreditation by BBB to lend via NPIF under the Coronavirus Business Interruption Loan Scheme (“CBILS”) from July 2020. This has really helped us to support those businesses that are losing revenue or seeing cash flow disrupted as a result of COVID-19. At a time when many of the high street banks have been unwilling or unable to support small businesses, or indeed unable to react quickly enough, Mercia has been able to resolve these short-term needs through CBILS.

As our business model shows, our output is not solely reliant on publicly-funded initiatives. In September 2020, we announced an additional commitment to our debt funds alongside our well-established investment partner, the Greater Manchester Pension Fund. Mercia SME Loans II, a fund of up to £40million, helps ambitious, regional businesses that are seeking debt finance as they move beyond the cash flow constraints caused by the COVID-19 pandemic. The fund will typically lend up to £1.0million to support the growth of regional SMEs, predominantly across the North West of England. Mercia’s first SME Loans fund was launched in 2015 and backed 52 businesses, including high-profile brands such as Harrogate Spring Water and polyurethane fabricators, Rosehill Polymers.

COVID-19 has created challenges that we have not seen since the recession of 2008 and dot-com crash of the late 1990s. Having led investment teams through both periods what I have learnt, and which is the very essence of Mercia today, is the importance of ensuring that we behave responsibly with the right type of capital to deploy at the right time.  Economic downturns such as this will always create short-term funding needs for those businesses and Mercia is well placed to fill that gap, as we help viable businesses return to prosperity.