Santander Growth Capital is designed for fast-growing, profitable businesses, and offers mezzanine funding of up to £3 million for businesses who are finding it difficult to find investment. They might be launching into a new market, diversifying their product range or may have to make a different significant investment in the business to unlock its potential.
Unlike other mezzanine funding options on the market, the finance offered through the Breakthrough Capital Growth fund does not require a business to hand over equity in the business, or relinquish any control in the boardroom. The money is advanced solely in the form of debt, repayable at an agreed point in the future, with the bank receiving its return solely through interest repayments. The rate is set at 5% over LIBOR – paid quarterly – and a further 5% per annum rolling up.
To be accepted for the Growth Capital programme, your business needs to be growing profitably (the funding isn’t intended for start-up or pre-revenue companies, or really lifestyle companies without ambitious management). To be eligible, businesses need to have a track record of profitability, have a turnover of between £0.5-25 million, and have cash-generative growth of around 20% or more per annum. The quality of management is also important: businesses seeking to take advantage of the funding should have a strong team in place, with sufficient experience to deliver on the growth plans.
The first two recipients of Santander Growth Capital investment are Surrey-based high-tech business Vocality and Solihull-based veterinary group, YourVets.
Vocality gets new opportunities
Vocality is a cutting-edge satellite communications business based in a network of barns in the Surrey countryside. The company designs and produces voice communication systems and network routers for military and commercial satellite users. They have emergency, government and tactical communications applications, as well as being used for news broadcasting.
Julian Bashford, CEO of Vocality, spoke to Breakthrough about the business' growth capital investment. Scroll down for video.
The small, 32-employee business launched in 1995 and has grown organically over the years, expanding from one converted barn, into a business with offices around the world and a turnover of nearly £6 million in 2012. However, it wasn’t expanding as fast as it might and Julian Bashford, CEO of Vocality, found that the only available finance for growth had too many strings attached.
“Before we entered the Santander programme we found ourselves in a position where we were growing, and had been looking for funding. We were exploring different options, however the principal problem was they all wanted to take some sort of ownership and have influence at board level. While some of the other programmes out there require you to give up part of your business, the Santander fund doesn’t require that, and actually seems to support the ethics and the spirit of the business.”
The company has received £1 million of growth capital to help it exploit new opportunities within the maritime and fast-responder satellite markets, as well as to bring a tranche of new, innovative technology to the marketplace. As Julian explains, “This funding will enable us to take on new talent and to realise exciting opportunities that exist with our enviable British and international client base. We have been supported over the years by some of the most demanding and exciting customers who are providing services to people risking their lives every day. We are really excited at this point in Vocality’s life, as we feel we are returning the commitment to us with a major step in innovation.”
The business is forecasting further rapid growth in the coming years and is looking to take on additional staff as part of the investment, particularly in its engineering, test and development areas. In addition, Vocality expects the growth investment to have a positive impact on its British manufacturing partner and supply chain.
YourVets gets £1.25 million to add new practices
Midlands-based veterinary group, YourVets, was established in 1997 to provide affordable veterinary care. It has grown rapidly since the current management took over in 2005, with the opening of four new practices in Rayleigh, Coventry, Dagenham and Solihull. However, while growth has been fast, it also hasn’t been fast enough for Janet Martin, CEO at YourVets.
“Our recent successful expansion has proven that our business model works and has potential for further growth, but we are at a size where accessing the funding to accelerate this growth is problematic. Santander’s Growth Capital loan enables us to access funding based not just on the current value of the business, but what we can grow the business into over the loan period. Plus, it comes at a price that is affordable but does not cost us ownership of our business.”
With the Government’s Regional Growth Fund co-investing alongside Santander, YourVets has received £1.25 million through Growth Capital – to help expand the business from its current seven practices to 11 over the next two years, creating 150 new jobs in the process.
Commenting on the first investments, Steve Pateman, Santander UK’s Head of Banking, said, “We are proud to have made our first investments through the Breakthrough programme. Access to finance is crucial for businesses looking to invest and grow. For too long there has been a gap in the funding market for smaller companies looking for investment finance that is affordable and yet enables them to keep hold of their company in its entirety.
“We hope that these loans will be the first of many this year and, in the long term, we hope that our Growth Capital programme will inspire other banks and private institutions to look at new, innovative ways to get this all-important type of funding to growing smaller businesses.”
As well as the funding from Santander, both Vocality and YourVets are also benefitting from additional help through Santander’s Breakthrough programme. Vocality CEO Julian Bashford has been to Brazil on a Santander trade mission to discover potential markets in Brazil and South America, whilst both YourVets and Vocality will also benefit from a graduate intern through Santander’s new internship programme. Both have also attended Breakthrough masterclasses and live networking events.