MBO Funding

Routes to Funding for MBOs with Ludgate & ThinCats

ABACUS (The magazine for Chartered Accounts Birmingham & West Midlands)
Issue 5 / Spring 2017

Bank lending to small businesses is following a general downward trend; the Bank of England’s latest statistics show gross lending to small businesses to be at its lowest level since the records began two years ago. 

One of the obvious effects is that SMEs are finding it harder to access funding via traditional avenues for a range of needs – not least MBOs.  

Offering a raft of opportunities for the right management teams, MBOs or MBIs can be the best option for many reasons. However, these may not present exactly the right criteria for the logarithms demanded by conventional financial institutions, and many are turned away before even getting to that stage.

Ludgate Finance, experts in business finance solutions, pride themselves on providing the right financial package for each company that they help. They were one of the very first to recognise the potential of the peer-to-peer lending arena, and its capacity to plug the widening gap in business funding. 

Combining the best from significant experience in the traditional banking sector with the new options opened through P2P lending, Ludgate advises on the best route to funding for SMEs across the board – and successfully accesses loans for many small businesses who have been turned away elsewhere. 

Quoting MBOs and MBIs as a particular strength, Steve Grice at Ludgate explains the way that they work: 
“We take an active interest in our clients’ businesses in the same way that an old-fashioned bank manager would, because that’s the way we have all been trained in the past. However, the flexibility provided by the P2P platforms means that we can come up with innovative and pragmatic proposals which could not be fulfilled by mainstream lenders.” 

This view naturally dovetails with online P2P business lending specialist ThinCats, who uphold the view that each application has a story, and a personal approach is necessary to truly understand the background before a decision can be made. Where others may refuse to even look at an MBO proposal, ThinCats adopts a realistic approach, taking into account previous trading details, cash flow and plans for development. Over the years that Ludgate and ThinCats have worked together, ThinCats investors have successfully financed a vast array of loans for Ludgate clients, including a range of MBOs and MBIs that had proved difficult to fill elsewhere, despite being profitable and well established. 

One such MBI involved a West Midlands-based heating, ventilation and air-conditioning contractor, MVS Mechanical Services Ltd. MVS borrower Andrew Dowd raised a two-tranche £1.25m term loan through ThinCats for a management buy-in. The company, founded in 2001, had forged a profitable niche for itself, completing projects in the mechanical and electrical service installation sphere that many competitors were unable to tackle. Much of their business was repeat, based on good customer service and competent skill sets, and they were able to demonstrate significant growth, industry accreditations and an impressive array of market sector coverage. The future, too, was looking bright; with a long term business development strategy angled to win longer term, higher value contracts with increased margins through their ‘one stop shop’ approach. In another successful collaboration, a £150,000 loan was sought by a fire safety organisation for a management buy out. The company provides commercial fire safety services to regional businesses, enabling customers to reach the requirements of their Fire Safety Assessments. It was able to demonstrate ongoing annual service contracts, a diverse base of customers, and a relevant array of certifications and accreditations, as well as very steady trading figures and no external debt, establishing them as a very viable option for Ludgate to recommend for a ThinCats loan. 

ThinCats and Ludgate provide a partnership that bridges the gap between SMEs and the money that they need to grow and develop, and fills it with the necessary experience and industry acumen to genuinely assess applications for funding based on real term evidence and analysis rather than mathematical models and negative assumptions. 

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