Here at Nucleus, we champion small businesses. In fact, we’ve won awards for doing so. As one of the top direct lending firms, our commercial finance products have helped SMEs like yours find alternative funding options.
Offering a variety of financial solutions, discover what direct lending is, how it can help you achieve your business goals, and how we can support you with the finance your business needs in order to flourish.
Direct lending companies work by providing capital to small and middle-market companies (SMEs) to help them grow. A direct lending fund acquires its capital through a number of investors, including wealthy individuals, asset management firms, business development companies and even peer-to-peer crowdfunding. This pool of money then provides debt finance to businesses in need.
In recent years, mainstream banks have been reducing the number of business loans they offer to SMEs and start-ups because of the potential risk that’s involved.
This has led to private lenders making loans to businesses without using an intermediary, such as an investment bank or broker. Because of how easy it is to apply for a direct lending fund, they are fast becoming a popular way for businesses to raise the capital they need.
Direct lending funds contain capital raised by asset managers from a variety of investors and can be contracted in three ways:
Direct lenders operate as a single entity, whereby you apply to one company for a loan and they either grant you a loan or not. Whereas traditional lending uses a broker, who will reach out to several lenders on your behalf.
Direct lending firms will often have fund managers who are responsible for individual cases and will be your first point of contact. Before you approach a direct lending facility, you should make sure all your business financials and business history are in order as these will be important for securing the direct lending funds you require.
If they think your business is suitable for direct lending, the fund manager assigned to you will carry out a more detailed investigation where they will look at how the business operates too. Based on that due diligence, they will then decide whether to lend you money and what the terms of the agreement will be.
There are 5.8 million small businesses in the UK and this figure is only set to rise. While traditional lenders like banks are providing business loans to SMEs, direct lending partners still make up the majority of business loans. In fact, in the first half of 2019, £12.2 billion was lent to small businesses, with SMEs based in London and South East receiving around 40% of all SME loan capital.
It’s for this reason that SMEs are the ones who benefit the most from a direct lending fund, and direct lenders still favour this middle-market too since it’s one of the biggest investment pools, with 99% of all UK businesses classified as an SME.
Direct lending funds can be used in myriad ways to support your business’ growth. If you run a fast-growing business, using debt to support your growth could be the solution you’ve been looking for. Unlike equity, debt has a specified interest rate and a schedule of dates when interest is to be paid.
Debt can be used to finance a wide variety of business activities including refinancing existing debt, funding future growth, raising capital to support M&A, or just raising debt to address shareholder opportunities.
Before borrowing money from a direct lender there are some things you should consider:
If you’d like to know more about how Nucleus can help with funding, then get in touchwith ourteam of friendly advisers and discover how we can help you. The eligibility criteria and application process behind our business loan products vary, so it’s worth talking with us, so we can better understand your business needs.
Explore the types of funding we offer and see how we can help your business grow.