SME lender Flender seeks to widen funding base after debt restructuring

Some investors said to have taken ‘sizeable haircuts’ after Scarp process

Flender Ireland has lent almost €68 million to small businesses since 2016

Flender Ireland, the finance provider that has lent almost €68 million to small businesses since 2016, is looking to widen its funding base after emerging from a restructuring of parental and Revenue debt.

Eoghan Boyle, financial controller and incoming chief executive of Flender, confirmed that the conclusion of a Small Company Administrative Rescue Process (Scarp) at Flender in February has been followed in recent weeks by a debt restructuring at its UK parent, NKK Finance.

The Scarp “examinership-light” process is known to have resulted in NKK, which had extended €3.5 million of loans to Flender, and Revenue, which was due €700,000, writing off a significant portion of what they were owed.

The deal required a follow-up restructuring at NKK, which had raised €7.9 million over the years by way of equity, convertible loan notes and convertible preference shares to fund the Flender business.

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Holders of some €1.7 million of convertible loan notes, including a number of high-net-worth Irish individuals, and Enterprise Ireland, which had invested in €350,000 of preference shares in NKK, are also understood to have taken sizeable haircuts.

Mr Boyle, a spokesman for Revenue and spokeswoman for Enterprise Ireland declined to comment on the financial terms of the restructurings.

Flender started off in the peer-to-peer lending market but now sources funds from a European institutional investor, which Mr Boyle declined to identify. Flender acts as an intermediary and charges a 5 per cent commission for loans set up through it. The loans remain on the books of the actual lender.

Mr Boyle said the European firm has remained “very supportive” throughout the restructuring. Flender extended close to a further €8 million of loans to SMEs from the time it filed for a Scarp last December, according to figures on its website.

“We are in talks with potential new funders and are hoping to close an initial new deal as soon as the end of this year,” he said.

Flender has focused since its inception on providing term loans to small businesses, currently offering sums of up to €300,000 for as long as 48 months. However, it has more recently been piloting a revenue-based financing product, Mr Boyle said.

“We are also looking at other types of innovative products to add over time,” he said.

Financing conditions for nonbank lenders have eased in the past six months, after financial markets concluded that central bank rates had peaked, after an aggressive series of hikes. The European Central Bank (ECB) cut its main rates by a quarter of a percentage point last week, while economists see the Bank of England making a similar move in August, followed by the US Federal Reserve as soon as September.

Gerry Jennings, a financier and former banker, who joined the boards of NKK and Flender in 2018, is the sole director of Flender, following a number of executive and non-executive changes in recent years.

Bryan Carroll, a former Bank of Ireland executive who founded a digital bank in Vietnam in 2019, has been lined up to become chairman.

Flender is in the process of further bolstering its board to drive the recovery and growth strategy, having tapped Lucan-based accountant John Burke and German executive Norbert Bruell to become non-executive directors.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times