Structured Lending to SMEs Discussion material only for the - - PowerPoint PPT Presentation

Structured Lending to SMEs

Discussion material only for the attention of sponsors, lending institutions and professional advisers

DISCLAIMER

This information has been prepared for information purposes only by Nash Business Capital Limited NBC and it does not carry any right of publication or disclosure, in whole or in part It may not be forwarded to or shared with anyone else, without the express prior consent of NBC The content of this document or website is proprietary and may not be copied or replicated by any person This presentation does not constitute a financial promotion for the purposes of the Financial Services and Markets Act 2000 Nothing in this presentation should be construed as advice or an offer of, or invitation to, engage in investment activity NBC is not conducting any consumer credit related activities which would be regulated by the Consumer Credit Act NBC is a principal investment and lending business providing capital directly to companies for business purposes.

Introduction

P1

Nash Business Capital Limited (“NBC”) is a principal lender to UK SMEs Backed by a specialised credit manager based in the United States with over $2 billion of capital, we have secured funding of up to £100 million for our strategy The strategy focuses on providing secured and flexible capital to growing SMEs Often senior lenders are unable to lend sufficiently to assist growing SMEs, even when they have material revenues and earnings, whil st traditional private equity or credit institutions seek larger transaction sizes and/or equity control As a result of this market dislocation, a number of ‘institutional grade’ but ‘sub institutional scale’ transaction opportunities arise NBC extends growth capital financing to SMEs, either as a 1st charge senior or 2nd charge subordinated lender, depending on the development stage of the company NBC has the team and expertise to originate, execute, monitor, exit and, if necessary, resolve these transactions In the past two years, the team has completed over fourteen successful secured lending transactions and is actively looking to grow its lending activity We look to achieve typical SME mezzanine finance returns of 1.5 1.8x over a 3 to 4 year period. After 12 months there are no early repayment charges. We achieve our return via interest coupon and a redemption premium instrument. We can defer interest and capital repayments to suit the needs of the borrower

A Complementary Solution

P2

NBC looks to fill the gap between private equity capital and bank lending, taking higher risk positions than banks and

• ffering financing arrangements to help protect existing ownership structures
• Risk

Security Return Repayment Time Private Equity Investment Unsecured 3-4x 5-8 Years Secured 10-12% + Redemption Premium 1.4x-1.8x CoC 2-4 Years Bank Lending Senior Secured 3-8% Up to 5 years

Lower Higher

Working with Senior Lenders

P3

NBC works with several senior lenders to structure financings jointly that are complementary to each financing party and to the benefit of the borrower: NBC is able to offer flexible financing options to SMEs that have the collateral, but lack the historical cashflow generation to secure senior loans from mainstream lenders (i e via PIK only and non amortising periods) NBC can provide additional guidance and/or assistance to borrowers to establish the necessary accounting and finance functions and enhance their corporate governance structures, typically via an observer seat on the Board By the end of the term of NBC’s initial loan the borrower will have established the appropriate track record and is ready to be refinanced by a senior lender (with NBC able to position itself as a second charge lender if need be) We have experience of working with senior lenders on a number of successful financings where we have acted as the junior lender

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Working with Private Equity Funds

P4

NBC works with a number of stakeholders, including private equity, to provide funding to SMEs. Our funding solutions are complementary to the objectives of private equity investors: NBC is able to offer flexible first charge and second charge financing options to SMEs that have the collateral, but lack the historical cashflow generation to secure senior loans from mainstream lenders We are able to make the loans PIK only and non amortising for part of the term, thereby preserving cashflow By providing additional leverage, we can boost returns on invested capital We have experience of working with senior lenders on a number of successful financings where we have acted as the junior lender Our funding size range is between £0.5m --£5m, which is below the typical Mezzanine or sub debt provider A number of our borrowers will typically seek an exit route through a trade sale or auction

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Summary Investment Criteria

P5

NBC works with a number of stakeholders, including private equity, to provide funding to SMEs. Our funding solutions are complementary to the objectives of private equity investors: Business models forecast to generate annual EBITDA £500,000 £5m within 24 months of loan being provided Loan size of between £0.5m and £5m Maximum leverage of 4x current year (or subsequent 12 month period) forecast EBITDA Forecast cashflow (CFADS) to debt service ratio of at least 1.25x Risk weighted LTV (1st/2nd charge) on realis able asset value Available collateral in the form of realisable liquid or illiquid assets or creditworthy receivables Loans to facilitate growth, asset purchases, acquisitions and MBOs (not working capital only facilities) UK domiciled businesses with high revenue to cash conversion andwithout concentrated customer risk Ability to amorti s e loan instruments with capital repaid

• ver a maximum of 4 years, with up to 2 years interest
• nly payments

A responsible approach to environmental and social issues, particularly in the way goods are produced, services are provided and resources are used A business culture with an accountable, transparent approach demonstrating principles of integrity in business practice

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Example Collateral Types

P6

REAL ESTATE COLLATERAL NON-REAL ESTATE COLLATERAL

• Fuel Forecourts
• Residential Property
• Distribution & Logistics
• Pubs
• Warehouses
• Infrastructure
• Cinemas
• Hotels
• Garden Centres
• Gyms
• Schools
• Car Parks
• Plant & Equipment
• Vehicles
• Media Rights
• Electricity Generators
• Licences
• Aircraft
• Medical equipment
• Precious Metals
• Art
• Qualifying Stock

P7

Fuel Forecourt Operator

• Mezzanine investment behind bank lender
• 75% LTV on freehold assets based on 12 month forward EBITDA

Ecommerce Retailer

• Senior lender
• 95% LTV on residential investment property provided by shareholders
• 3 year loan, 12 months interest free

Manufacturing Business

• Second charge lender behind bank lender
• Loan against basket of assets including equipment, receivables and subordinated on

factory Specialist Equipment Lessor First charge against specialist equipment

• Debenture against company

Distribution and Logistics Second charge against warehouses

• Debenture against company

Events Producer First charge against scaffolding, portacabins, fixtures and generators Junior debenture behind bank

CONTACT: T:+44(0)203889 9600 | W: www.nashbusinesscapital.com 40 Craven Street, London WC2N 5NG