Palatine launches growth credit strategy for UK's underserved regions

Harriet Matthews
12 May 2023

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UK-headquartered private equity firm Palatine has launched a growth credit strategy to support B2B businesses in underserved regions of the UK, newly appointed head of growth credit Will Chappel told Unquote.

Chappel has previous experience in venture debt and technology roles with firms including Shard Credit Partners, Shawbrook Bank, HSBC and Barclays.

Palatine had been looking at growth credit as a potential new strategy over the past year or so, Chappel said.

"The Palatine platform and its regional presence is a huge benefit as we can lean on some of the existing relationships across the firm," he added. "Combined with my network, I'm confident that this will create a strong deal pipeline."

Chappel did not disclose details about fundraising for the strategy, but Palatine said in a statement that its growth credit business will back B2B companies operating in the cyber, fintech, SaaS, healthtech, medtech, AI and advanced manufacturing sectors. It will invest in the North, Midlands, South West, and the South East regions of the UK.

"We won't say no to deals in London, but the focus will be on areas where we think that we can make a difference," Chappel said. "I see growth credit in the regions of the UK outside London as a totally underserved and underdeveloped market. VC firms tend to be quite London-centric, so the education, opportunity and capital has not necessarily been there. It's a fantastic opportunity to level up a lot of the cities and bring a lending product to areas that have not had access to it, let alone known about it."

The strategy will seek VC-backed businesses or businesses with "strong, aspirational, established investors" according to Chappel, with the aim of providing additional cash runway. It will focus on growing businesses with around GBP 2m of recurring revenues, he said, adding that a company's ability to service its debt will also be key.

Growth credit gains
The strategy launch comes at a time when growth credit funding is in short supply for UK businesses. "We see the SVB situation as an opportunity," Chappel said. "We're trying to come at this with a hands-on, helpful, regional approach, understanding the challenges that come with not being in the London ecosystem."

There is a strong case for growing businesses to take on this form of financing, according to Chappel. "The loans will help businesses to grow, add debt on top of their equity, and add a partner into the cap table, which allows them to gather more thoughts around exit positioning," he said. "Growth credit is always cheaper than equity and many businesses can benefit massively from borrowing rather than diluting further to get to the milestones that they want to hit."

In addition to Chappel, Neil Pitcher, former CEO of European Venture Partners (now Kreos Capital) and ETV Capital, has also joined the firm, taking on a role as non-executive chair of the new fund. He heads debt advisory firm LGF Partners.

Palatine already manages a series of private equity and impact funds. Its buyout funds invest GBP 10m-GBP 30m per deal, while its impact funds invest GBP 5m-GBP 20m in companies that aim to have a positive impact on society or the environment.