Service to boost green growth
A NEW, private equity backed commercial finance service is aiming to boost the growth of green businesses in the Tees Valley.
Launched as a separate division of Darlington-based brokerage Creative Business Finance, it is supported by a single, unnamed UK house, keen to invest in long-term contracts, such as alternative energy and waste recycling, where business has struggled in the past to borrow against future cash flows.
Creative Business finance director and financial expert, Mark Blayney, said he had received five “reasonably significant” inquiries from firms wanting to access funds within just a few days of launch, indicating the urgent need for a targeted funding package to kickstart the sector.
“The traditional model of borrowing in the UK tends to rest on two legs; what’s the stream of income that’s going to allow the business to repay the loan and what is the lender’s security if it all goes wrong, based on what can we sell this bit of kit for,” says Blayney.
“If you have a situation where the real value of the installation is a contract going forward five years that’s going to repay from electricity generated from a wind turbine for example, traditional forms of lending find it very difficult to lend on the strength of that cash flow when that’s also going to be their security. You are resting both your legs on one thing. In a start-up that’s something traditional lenders can find very difficult. Our funders are looking at that situation and saying the real value you see in this is the future cash flow.”
He said the private equity firm had deliberately gone out to source investment from backers with “an appetite for this type of scenario”.
He added: “As an advisor, it is always frustrating when we find clients with financing needs, such as a requirement to borrow against expected future cash flows, which existing sources of funds are often unable to meet.
“We want more businesses to think about opportunities for growth and we believe through the funding on offer, and the accessibility of our support, we can help businesses realise their ambitions.”
Typically, this “boutique” funding would be up to £1m over five years, but there were opportunities to finance larger projects, said Blayney, who has launched the service under The Debt Boutique.
“Renewables are very capital intensive. We have been approached by one that’s going to need £250m to put it together. At that level you are starting to get into capital markets but smaller projects, such as single large commercial wind turbine or a biomass plant, might be around £2m and we can put together packages for that amount.”
