Palio launches debt-financing model for lower mid-market

Palio Capital Partners is fundraising for its maiden fund, which will provide senior debt and mezzanine loans to businesses with an enterprise value of between £10m and £100m.

The European Investment Fund has already pledged a cornerstone investment to Palio’s Superflex Fund, taking the fund a third of the way to its first close of £100m.

Following a surge in demand for non-bank finance and an estimated £25bn of debt funding and refinancing needed for UK small and medium-sized enterprises (SMEs) between 2012 and 2016, Palio believes it is carving a new niche in the UK market by providing senior debt and mezzanine loans to businesses with an enterprise value of between £10m and £100m.

Mike Henebery, chief executive officer and founder of Palio, said: ‘The SME market is the engine room of the UK economy, but the major constraint on the growth of these businesses is the scarcity of debt finance.

‘The government has recognised this issue and recently launched the Business Finance Partnership to ease the flow of credit by investing £1bn through managed funds that lend directly to UK SMEs.

‘We fully support the government’s plans and have been invited to participate in this project, which we see as a force for good.’

Palio plans to build a hybrid loan portfolio, predominantly debt and mezzanine, of approximately £250m. Initially it will lend exclusively to UK SMEs with experienced management, capable of attracting private-equity backing and thereby representing a relatively safe lending proposition.