Grid Finance secures €100m from UK-based Fasanara to grow SME lending

Cash-advance lender focusing on short-term loans to merchant card financing

Grid Finance, a cash-advance lender to micro and small businesses, has secured a €100 million funding line from UK alternative asset manager Fasanara Capital as it targets expansion over the coming years.

The funding, which is in addition to existing financing partnership with US hedge fund Thiele Capital Management, has allowed Grid Finance to conclude that it will not make any return to its original financing pool, the peer-to-peer (P2P) lending market.

Derek Butler, a PwC-trained accountant who launched Grid in 2014 as a P2P lender, after four years working for aid agency Goal in Uganda and Haiti, had long campaigned for regulation of the P2P sector before the Central Bank unveiled a regime earlier this year under new European Union rules covering the industry.

Grid changed its business model in 2019 and got out of crowdfunding. It now focuses on providing short-term loans to businesses that earn money from credit card and debit card sales – an area known as merchant card financing.

Mr Butler has told The Irish Times in recent days that the company would not be returning to the P2P market.

Interest rates

Grid lent out about €10 million in each of the last two years and expects to write €25 million of business in 2022. It currently charges interest rates of 7-12 per cent a year, depending on the risk attached to customers.

Mr Butler said the flexibility of its product, which allows borrowers to make lower payments during quiet months, means its lending momentum is “very strong”, even as underlying demand for credit among SMEs remains low.

"Demand for credit in general is likely to remain subdued, as businesses continue to work out what the post-pandemic economy will look like and they monitor inflation and other macro factors, such as the war in Ukraine, " he said.

“This is a very uncertain environment for decision-making for small business owners.”

Francesco Filia, chief executive of Fasanara, said: "Grid Finance is serving a large addressable and often underserved demographic in the SME sector in Ireland. We are excited to commence working closely with Grid Finance and its management team, with the objective to becoming their strategic debt funding partner and to help them scale in Ireland and beyond in future."

Grid, which appointed former Department of Finance secretary-general John Moran as its chairman in January, is set to be profitable in 2022 for a third straight year, according to Mr Butler.