Since the global financial crisis, the financial services sector has seen the significant growth of non-bank specialist lenders gaining market share from traditional high street banks. This has brought more diversity, competition and opportunity to the marketplace in a variety of areas, especially when it comes to small business funding. The reduction in bank lending to SMEs was caused by several factors, such as a stricter regulatory environment, increased risk aversion, increased cost of credit, changes in bank strategy, and use of legacy systems impacting customer experience.
Although the trend has continued since 2020, the pandemic did somewhat increase access to funding with the introduction of government guaranteed loans, administered by the British Business Bank (“BBB”). Under this scheme, the government provided a guarantee of up to 80% of the value of loans made by accredited banks and non-bank lenders to help stimulate lending to businesses impacted by the pandemic. This led to a temporary increase in funding from high street banks to SMEs. However, the general trajectory of banks retrenching from the SME market is expected to remain.
Nevertheless, the BBB schemes played an important role in fostering the growing role of non-bank lenders in supporting SMEs, by providing competitive funding, guarantees or facilitating alternative lenders access the capital markets. Overall, this has contributed greatly to levelling the playing field between banks and non-bank lenders.
In a speech in 2021, Isabel Schnabel, Member of the Executive Board of the ECB told the Annual Congress of the European Economic Association:
“Non-bank financial intermediaries now make up a much larger share of the financial system than they did in the early years of our common currency. Likewise, a growing number of firms resort to market finance to satisfy their demand for credit.”
While there are many different facets to this evolution, its emergence has been of commercial importance to the SME funding landscape and is a space that’s continued to gain both legitimacy and relevance. With benefits ranging from more bespoke financing structures to processes that are better geared towards the specifics of businesses and their needs, non-banks have expanded both in terms of opportunity and popularity.
As a case in point, despite the macroeconomic headwinds of the last two years, the role of non-bank specialist lenders has become a vital tool for businesses, supporting the development of a competitive commercial environment and facilitating enterprise that’s critical for economic development. The opportunities this sector presents has been particularly welcome in scenarios where traditional banks have pulled back.
UK Finance wrote: “UK policymakers should arguably be commended for the steps they have taken to build a competitive and open environment for the provision of credit to businesses and consumers over recent years. Their pragmatic approach has enabled a range of players and business types to operate within the UK – often meaning a greater range of options and more competitive prices for those looking for such services. A vital part of this is the non-bank specialist lending sector (NBSLS).”
In terms of the scale of that change, at the end of 2023, the Fintech Times wrote:
“40 percent of UK small and medium-sized businesses (SMEs) have found it easier to gain financing from alternative lenders”. They added: “Alternative finance options increasingly offer a lifeline for UK SMEs, with seven in ten (70 percent) admitting they wouldn’t have survived the current cost of living crisis if it wasn’t for these types of lenders.”
A diverse space that’s particularly geared to serving SMEs, it’s worth remembering that SMEs account for 99.9% of the business population in the UK and around 53% of turnover in the private sector. With that in mind, UK Finance wrote: “It is estimated that about 30 percent of all SME finance comes from non-banks.”
Meanwhile, Alternative Credit Investor says: “Alternative lenders and private debt funds have filled the gap left in the UK small business finance market after banks scaled back their lending, according to the British Business Bank. The state development bank’s small business finance markets 2023/24 report noted that alternative finance providers ‘are now very much part of the mainstream for many smaller businesses looking to borrow and are able to reach many parts of the market more traditional lenders cannot or do not wish to reach’.”
LGB has been at the forefront of these developments, as they are relevant to both investors and corporate clients. With a bird’s-eye view on both ends of the market, part of our role is to provide solutions for non-bank lenders to establish themselves and grow their businesses. We have seen fast-growing and disruptive lenders, such as Simply Asset Finance and Rivers Finance Group, go from strength to strength by presenting compelling and innovative financing solutions to the SME market.
Simply Asset Finance specialises in hard asset finance for UK SMEs, and in 2020 established an MTN programme which has grown to £65 million to date. As of the first half of 2024, the group had provided c.£1.4bn of asset finance since inception, most of which has been funded on Simply’s own balance sheet with the remainder brokered out to its funder panel. Simply ranked in the FT1000 fastest growing businesses in 2022 and 2023.
Meanwhile, Rivers Finance Group is a London-based asset leasing and corporate loans business, also ranking in the FT1000 fastest growing businesses for four consecutive years from 2017 to 2020. They established an initial £6 million programme with us in January 2016, and thanks to growing demand they have continued to fundraise with LGB with multiple rounds since, and the programme has increased to a £40 million limit. In many instances, investors have elected to reinvest with the company as a result of its progress. This year, the company celebrated the 10 year anniversary of its collaboration with LGB.
LGB Capital Markets Director, Fergus Rendall, said: “Investors often ask us whether the non-bank lending market is saturated, given the increased number of entrants over the last 15 years. However, it is worth noting that pre 2008 the large high-street banks did the vast majority of SME lending, leaving less opportunity for new players. Since then, a combination of new regulations, and a lack of appetite amongst traditional banks has created a prime market for new businesses to emerge and serve an area of the market with good credit standing where there was high demand. As such, many non-bank lenders are simply lending to businesses that were previously serviced by traditional banks that have now retrenched. This should give investors’ confidence that there are ongoing opportunities in this space for all involved. Yes, for those borrowing, these non-bank lenders can represent a slightly higher cost of capital, but they also provide an option to access funding that wasn’t previously available, fuelling enterprise and allowing smaller businesses to thrive. The sector is also now reaching a level of maturity that further galvanises its success, with the first wave of non-bank lenders becoming acquisition targets for bigger banks. Notably, Allica acquired the bridging lender Tuscan Capital this year.”
LGB is in a unique position for introducing investors to potential opportunities in this burgeoning market, as well as to provide businesses with opportunities to raise capital. If you would like to find out more, you can explore our investment approach and our fundraising solutions, or contact us for further information.
LGB & Co. Limited
Tintagel House, 92 Albert Embankment
London
SE1 7TY
Relationship Manager
Ellana joined LGB in March 2024 as a Relationship Manager for our investing clients. Prior to LGB, Ellana worked at Bellecapital, handling client relationships and supporting the portfolio management team. Ellana graduated with a First-Class in Mathematics from Cardiff University and has a Level 4 Investment Advice Diploma.
Adviser
Simon became an Advisor to the Board of LGB & Co. with a focus on business strategy and initiatives in March 2024. Simon has extensive experience debt capital markets and wealth management. He previously ran the client and then the investment business of Heartwood and became Chief Executive in 2008. He led its well-regarded acquisition by Handelsbanken in 2013. Simon subsequently became NED and Chair of AIM-listed WH Ireland Group PLC. He was also asked to represent the wealth management sector on the FCA Smaller Business Practitioner Panel from 2013-2016.
Finance Manager
Following a degree reading Chemistry at The Queen’s College, Oxford, Antonia trained to become a chartered accountant at a London-based audit firm. She then moved into the tax sector joining EY and completing the chartered tax adviser qualification. She then gained further experience working as a finance director within industry at a family office / hedge fund.
Founder and Chairman
Andrew founded LGB & Co. in 2005 and is the Chairman of the company. He has a particular focus on the development of strategic relationships with corporate clients and business partners. Prior to founding LGB & Co., Andrew was a Managing Director at Citigroup Global Markets, where he was responsible for its fixed-income business with private banks and retail institutions. Earlier in his career Andrew worked at Schroders in London and Tokyo. Andrew graduated from Oxford University with a degree in Modern History. He is a chartered member of the Chartered Institute for Securities & Investment.
Capital Markets Director
Fergus advises corporate clients looking to raise debt and equity capital. He is also responsible for the execution and ongoing management of LGB’s MTN Programmes. Fergus joined LGB in 2019 having started his career at Lloyds Banking Group on the graduate training programme, before moving to the Leveraged Finance division, where he focused on transactions with mid-market corporates and PE firms. Fergus holds an MSc in Petroleum Geology from the University of Aberdeen.
Adviser
Lisa has worked with LGB since 2015 in supporting the on-going cultural and organisational development of the firm, providing advice on strategic people matters. Since 2006, Lisa has been running her own consultancy and executive coaching business, People Possibilities Ltd. Her work is focused on supporting clients at an organisational, team and individual level to enable high performance,improve leadership capability and effect cultural and behavioural change. Previously Lisa has held senior HR leadership positions with Schroders, ABN AMRO and HSBC. Lisa graduated from the University of Birmingham with an honours degree in International Relations & French. She is a Fellow of the Chartered Institute of Personnel and Development (CIPD) and a qualified Executive Coach.
Adviser
Charles has played an important role in developing LGB & Co.’s investment approach by encouraging a focus on investing in businesses with strong IP or know-how with recurring revenue business models that can prosper throughout economic cycles. Charles brings over 30 years’ experience of investing in privately-owned and publicly-listed small and mid-market companies. He is a director of Larpent Newton & Co. and Hygea VCT plc. Charles qualified as a Chartered Accountant at Peat Marwick, now part of KPMG.
Programme size: £25m
Establishment Date: XX 2017
Number of issues: 20
Sector: Financial services
Focus: Loans and leasing
Programme size: £20m
Establishment Date: December 2017
Number of issues: 12
Sector: Marine tracking
Focus: Maritime surveillance and management
Associate
Ben joined LGB in October 2022 as an associate after spending three years as a credit analyst at 9fin, where he produced research on corporates in the European & US High Yield and distressed debt markets.Ben holds an MSc in Investment Management from Bayes Business School (formerly Cass) and is a CFA charter holder.
CEO
Cedric was appointed CEO in July 2022 after a period of 18 months as a COO. Cedric spent 15 years working on the energy and commodities sales and trading desks for global banks (BNP Paribas, BAML and MUFG). He gained extensive international exposure, being based in London and Singapore and covering transactions in all geographic regions. Cedric graduated from Global Executive MBA at INSEAD in 2018 and started working in the capital markets space for growth-stage companies. He is also a director of LGB.
Relationship Manager
Megan joined LGB in January 2021 as a Relationship Manager. She is responsible for all day-to-day transactions with investment clients and oversees the LGB Investments Platform and Deal Hub. Prior to LGB, Megan worked at Puma Investments, a tax-efficient investment provider, in the sales and investor services team. Megan graduated from the University of Bath with a Bachelor of Science degree in Psychology. Megan obtained the CISI Level 4 Diploma in Investment Advice in October 2021.
Investment Director
Ivan is LGB’s Investment Director: he is responsible for developing LGB’s investment proposition in the context of the broader market and economic developments. He regularly meets individual company management teams to seek out and monitor investment opportunities. Ivan has served as a senior adviser to the Equity Division of Société Générale, and was previously Managing Director in charge of equity sales for them in London. Earlier in his career, Ivan worked at Morgan Stanley, Lazards and Schroders. He has degrees in history from Cambridge University & London University, and an MBA from Cass Business School.
Managing Director
Simone is responsible for LGB & Co.’s business with investing clients, who include institutional investors, wealth managers and sophisticated private investors. Simone’s team provides access to a range of compelling investment opportunities with a particular emphasis on proprietary medium term note and equity transactions. Simone manages the portfolios of clients who have entered into advisory or discretionary investment agreements with LGB Investments, and advises the fund managers of the Guernsey-based LGB SME Fund. Prior to joining LGB & Co., Simone worked in the institutional fixed income department of Citigroup Global Markets. She began her career at Citigroup Private Bank in Geneva. Simone graduated from the University of Lausanne with a degree in HEC, Business Administration. She is a Chartered Member of the Chartered Institute for Securities & Investments.