New funding platform links private investors with larger SMEs
Finance platform InvestX is raising £25 million in equity through individual investors to fund mid-range SMEs.
Unlike Funding Circle, which arranges debt for SMEs, InvestX links equity investors with established SMEs.
InvestX plans to back 59 SMEs in year one and 400 small businesses in year two.
The average investment will be £250,000 but could be anything between £100,000 and £1 million.
Intriguingly, InvestX links up SMEs with investors using blockchain technology. Investors can convert cryptocurrency into investment tokens.
InvestX appointed former RBS banker Richard Chambers as chief operating officer earlier this month.
Chambers said: “This is a unique opportunity to build a business with the capability to match up established SMEs seeking funds with investors who want to invest in SMEs – a market that currently is not open. Having come from a traditional banking background, I have witnessed first-hand the large proportion of SMEs which struggle to access funding easily and cost effectively. In many cases, debt is not the most appropriate product as monthly capital repayments and interest charges eat into cash flow.
“Through InvestX, we will provide equity investment into smaller businesses in a cost-effective manner by using blockchain technology. This has the potential to revolutionise how SMEs access capital, and will align investors and businesses with the success of the business.”
Chambers has arranged more than £500 million of bank lending, mainly for equity-backed SMEs in tranches of between £5-£25 million. Companies that Chambers arranged finance for include Dunlop Aircraft Tyres, pilot training facility L3 Commercial Training Solutions and Optionis payroll services.
“The challenge is that the banks are risk averse and tend to lend to set formulas,” Chambers said. “One of my frustrations has been seeing good businesses not be able to borrow. They don’t fit the policy because they don’t like giving security.
“The biggest obstacles are cost and security and the time it takes to get the facility.
On average, it takes between two and three months to arrange a lending facility with a high street bank.
Chambers said: “The opportunity to join InvestX allowed me to join a challenger. We’re aligned with SMS owners, we’re aligned with government policy. Being an SME ourselves, gives you a much better insight into what SME owners are going through.”