Alternative lender SME Capital closes funding round

British alternative lender SME Capital scooped a new investment from three family offices to expand its offering in the under-served lower middle market. The investors, from Mustard Kick, Hambleden Capital and Karan Capital, will join the company’s board as part of the deal.

The investment allows SME Capital to accelerate growth, fund new loans and develop a new product which it will bring to market later this year. Currently writing tickets up to £6m, the firm is sector-agnostic and provides cash flow loans to the lower middle market, which has struggled in recent years to fund events like M&A, MBOs and MBIs due to the retrenchment of mainstream banks.

Just like SME Capital and its founder James Kaberry, the investors joining the board are passionate about supporting entrepreneurial businesses. They bring a wealth of experience and know-how as founders from a variety of sectors, including healthcare, e-commerce, transport, retail, real estate and financial services.

James Kaberry, founder and CEO of SME Capital said: “Having like-minded investors as energised as we are about supporting SMEs is vital. When financing in this part of the market was hurt by scaled back bank lending, it masked a huge number of quality, ambitious British companies ripe for growth. Even in the pandemic, these companies pivoted and created opportunities where others saw challenges. Many of them are family businesses and entrepreneur led, and all are looking to get to the next level. This fresh support from our new investors will help them achieve that, and in turn drive the UK economy forward.”

David Newns, founder of Mustard Kick, said: “No matter how great an SME is, it’s normally locked out of growth opportunities like an M&A event simply because the financial support isn’t in place. So SME Capital is a real game changer for the entrepreneurs it serves. They have great product-market fit and their customers – brilliant, profitable businesses – really value them. For someone like me who has started, scaled and sold my own businesses, I know how important it is to have this kind of support.”

Nima Sarikhani, Managing Partner at Hambleden Capital, said: “As an investor this is an amazing opportunity in a seriously under-served space. SME Capital is special. Not only do they have skin in the game by investing their own capital alongside institutions in the SMEs they serve, but they’re close to these businesses and work as supportive and flexible partners to the owners and management teams. They choose customers wisely, they really get under the hood and understand the business and the people behind it, and they foster close working relationships with them.”

Arjun Patel at Karan Capital, said: “The bespoke, relationship-driven approach from SME Capital is a boon for their customers. It’s a strong, deeply skilled team throughout the UK, helmed by high quality leadership. And the family offices extend that by offering a range of multi-sector skills as well as experience. We’re founders who, having scaled businesses to successful exits, reflect the ambitions of SME Capital’s customers.”