Since the financial crisis in 2009, a lack of liquidity - not only in the banking sector but on junior exchanges - meant that SMEs in the UK found it difficult to source adequate funding. Furthermore, a gap existed in the market between peer-to-peer lenders and the LSE Retail Bond Market, leaving SMEs who were looking for £500,000+ with very limited options. Some lenders now operate in this space; however the process for borrowers is generally arduous, with significant up-front costs. UK Bond Network serves to bridge this gap whilst streamlining the borrowing process and maintaining that fees are only taken once the borrower’s full funding requirement has been reached and subsequently drawn down.
UK Bond Network uses its growing syndicate of experienced investors to provide fast, flexible finance to established businesses who seek between £0.5m and £4m, all through an innovative peer to peer lending platform.
The idea for UK Bond Network was devised by Christopher Maule and was driven by two factors:
- The growing demand of his high net worth and institutional client base for secured yield; and
- The appetite of SMEs for flexible debt finance
Investments are made through an auction process. After structuring a debt piece alongside the borrower to ensure that all of their requirements are met, details of the offering are made available to investors on UK Bond Network’s auction platform. A one-week pre-auction period then takes place, giving investors time to view all the relevant company documents and details of the bond before the auction begins, typically lasting between 7 and 14 days. Once live, investors bid an amount (minimum £5,000) at an interest rate they choose (within set parameters). Those who bid at the most competitive (i.e. the lowest) interest rates are ultimately successful and form the bond investment. Throughout the entire process, borrowers have the simplicity of dealing with only one investor: UK Bond Network acts as the link between the borrower and the lenders, facilitating communication between the parties where necessary. Moreover, debt financing enables businesses to avoid unnecessary equity dilution, thereby enhancing value for shareholders.
After launching in October 2013, UK Bond Network has been able to build on Christopher Maule’s existing network of experienced investors to complete 4 auctions for SMEs, including a company listed on AIM and another on the Main Market of the LSE, with over 40 more borrowers in the pipeline.
This briefing was prepared by Ben Cohen of UK Bond Network. For more information, please contact Ben Cohen.