Direct Lending or Debt Funds is a direct form of financing to the company, without the intermediation of financial institutions. Its actors are investment funds, which grant loans to companies with the objective of obtaining a return on their investors' capital.
This alternative financing to banking, consolidated in countries such as the USA and the United Kingdom, is gaining strength in Spain. At the beginning, these funds were international or had foreign participation, although little by little funds of Spanish origin have been emerging.
P2P lending and crowdlending platforms are sometimes considered part of the DL sector.
On the one hand, borrowers tend to be small or medium-sized enterprises (SMEs) rather than large listed companies or large corporations that already, for example, have access to corporate bond issuance.
On the other hand, lenders can be high net worth individuals or families or asset management firms. However, they will only consider loans above €5M, so direct lending is mainly focused on middle market borrowers.
Bank Financing requires more regulation compared to Direct Lending, which causes greater rigidity and limitations for the former, being in many cases less attractive.
Among the advantages of Direct Lending are:
It must be taken into account that the cost of direct lending is usually higher than that of banking. In addition, sometimes it is necessary to carry out an audit to receive the capital and sometimes the funds usually condition the financing to have a seat on the Board of Directors of the borrowing company.
Bravo capital was founded in November 2013 by U.S. funds Avenue Capital and JZ Capital, and in January 2014 began operating in our country. more than 300 million euros in financed operations.
One of the first funds created in our country, has compro protagonists American Muzinich, gestoraespecializada in alternative financing and Arcano, independent financial advisory firm created a fund that aims to achieve up to 300 million euros to grant loans of up to seven years between 15 and 25 companies in all sectors.
The fund, called Iberian Private Debt, invests in loans and private credit issues of healthy Spanish and Portuguese companies and is aimed at institutional investors, family offices and private banks.
"The vehicle is designed to support companies in their growth, internationalization and export activity," says Diego Gutierrez.
Renta 4 Banco and AFI, created in June 2014 a direct lending fund managed by Aria Capital, the joint venture created by Renta 4 Banco and Afi, whose participants are national and international institutional investors. The volume of the fund is €200M. They lend to companies with an annual turnover of between 50 and 500 million in any sector, excluding only financial, real estate and emerging technologies.
Bankinter did not want to be left behind and in 2014 decided to boost direct lending to companies by joining forces with fund manager Magnetar Capital. Subsequently, in view of its success, it signed another agreement with Mutua Madrileña.