Exclusive: UK lender to launch dedicated defence fund for SMEs

Growth Lending, a UK-based non-bank lender that provides finance to small and medium-sized enterprises (SMEs), will open a dedicated defence sector-specific fund to boost innovation and growth among small companies, the company told DSEI Gateway on 10 February. 

The fund – National Defence – will launch later this year, Chris Mears, the Regional Head of Debt Finance at the company told DSEI Gateway.  

While Mears could not comment on how much finance the fund will be receive, SMEs can still access funds through a separate funding mechanism (‘central fund’) ahead of this launch, with GBP2-15 million available.  

Additionally, when looking into their previous funds, the company has earmarked around GBP200 million in funds for SMEs.  

So why defence, and why now?  

Growth Lending positions itself as a “partnership lender”, helping companies across multiple sectors on their growth and scale-up journeys, Mears explained. This new defence-specific fund is part of this mission, as it aims to support businesses that often fall outside the credit appetite of traditional lenders. 

Defence SMEs face particular hurdles when trying to access the working capital required to survive the sector’s characteristically long procurement cycles, Mears explained. 

 

 

It comes amid a context of increased financial vigour in the defence sector, with many financial institutions looking to invest in it for the first time.  

Despite this, banks are considered relatively slow, he acknowledged.  

Attempting to answer these defence-specific SME struggles, Growth Lending intends to offer loans designed to support client capital structures, helping them to scale their efforts and meet the requirements of defence contracts.  

The loans are non-dilutive, meaning that companies keep full ownership when taking on debt.   

The lender also takes the approach of structuring its loans against the current business, rather than historic accounts – a particular benefit for earlier-stage, or fast-growing businesses.  

This structure includes a credit line that supports contract delivery; this enables a company to pursue contracts today and repay the loan once revenue is received, alleviating the cash flow pressures often associated with winning large contracts.   

In terms of eligibility, companies looking to obtain finance from Growth Lending will need to have GBP3 million in revenue, be profitable, or on the way to profitability, Mears explained.  

Going forward, the company is looking to embed itself accessibly within the UK defence ecosystem, collaborating with the UK Ministry of Defence, trade associations, and regional clusters to support more SMEs in pursuit of success in defence.  

Their entry into defence finance represents a widening recognition of the sector’s growth potential and the ongoing challenges faced by SMEs. 

 

Correction: References to the GBP2–15million funding have been updated to reflect that this capital is drawn from a separate fund, distinct from the upcoming defence fund.