Whilst SLF was established as a mezzanine finance fund, a loan from SLF is in many ways exactly the same as a loan taken from a bank. For example, the procedure to secure an SLF loan is very similar to the process a company will experience when approaching a bank for funding. Also, and in common with say a bank term loan or overdraft, an SLF loan can be used for a wide variety of purposes within a business such as:
- Working capital to help deliver on new contracts
- Funding for capital expenditure to achieve business plan
- Development capital to support new product initiatives
However, as mezzanine finance, an SLF loan has other defining characteristics that would not ordinarily be associated with bank debt. The table below illustrates some of the key features of an SLF loan:
Features aligned to bank debt
- An SLF loan will be provided over a specific agreed term, the minimum being 3 years and the maximum 7 years
- There will be an agreed repayment schedule for the loan
- Interest will be charged on the loan
- The loan will be documented via a Facility Agreement
- Financial covenants will be set
- Capital repayment holidays can be provided to match cashflows e.g. no capital repayments for the first 2 years of a 5 year loan
- Redemption premium* is also payable along with capital repayments
- The Fund will take an exit only warrant**
- Maven will take board observer rights
- Full due diligence will be undertaken
An SLF loan represents long term, committed growth capital. The investment and portfolio team at Maven will work in partnership with you to help grow and develop your business, whilst management maintain full operational control.
*Redemption Premium: This is an amount added to each capital repayment and is normally expressed as a percentage. For example, if a company is due to repay £100 of principal in line with the agreed repayment schedule, and the applicable redemption premium rate is 15%, the total amount payable by the company is £115.
**Warrant: This is an agreement between the Fund and the company through which the Fund has the right to an agreed percentage of the company value in the event that the business is sold, listed or there is a change of control. For the avoidance of doubt, the Fund would not become a shareholder in the company, rather it is a mechanism to provide the Fund with a small share in any value realised upon an exit event.