British Business Investments director sees private credit growth as “structural force”
Private credit can “significantly” boost the UK’s funding capabilities, as banks continue to limit their lending, Richard Coldwell (pictured), investment director at British Business Investments (BBI) has said.
Despite ongoing risks for credit investors, including geopolitical challenges, the high cost of living in the UK, and the recent national insurance increases; Coldwell said that growth in private credit is “a structural force”.
“It’s driven by regulatory matters and the fact that the banks are not able to lend as expansively as they once did, and so private markets are filling that gap,” Coldwell told Alternative Credit Investor.
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“I think that private credit continues to offer an attractive risk profile in a relatively uncertain world.”
BBI is a dedicated credit investor which allocates approximately £300m per year into credit strategies. Coldwell said that the institution is “very consistent” with its deployment, and will continue to allocate to private credit funds and smaller alternative lenders in the year ahead.
“Direct lending continues to represent the significant majority of what we all understand as private credit,” Coldwell said. “And so that will always be the core part of any portfolio. But we’re increasingly seeing an interest in diversifying away from that where there are attractive risk-return opportunities.”
He added that BBI has a remit to finance lenders of all sizes, including peer-to-peer lenders. BBI was one of the first investors in former P2P lender Funding Circle, and has also provided funding lines for Folk2Folk and property lender CrowdProperty.
“We have a structured capital portfolio where we are effectively lending to smaller lenders through structures such as block discounting agreements, revolving credit facilities, and forward flow agreements,” Coldwell explained.
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“Those are structures in which we are attaching directly to security. We are open to supporting alternative lenders of all sizes, as long as they are UK-focused. We’re trying to support the broader market.”
BBI is a government-owned entity, part of the UK government’s Department for Business and Trade (DBT). Its remit is to support UK businesses, particularly in areas like venture capital, debt finance and growth funding. Coldwell emphasised that BBI stands above politics and views its role as being there to support the market, regardless of the government of the day.
“The reason we exist is there is less institutional awareness of the opportunities that exist at the smaller end of the market,” he noted. “We’re there to try and support those smaller managers.”
When onboarding a new lending partner, Coldwell said that primarily BBI is looking at the track record of the fund or platform. In particular, the institution is looking for lenders who can demonstrate that they can manage risk, and have the depth of resources to manage their portfolios in the event that something goes wrong.
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“We expect the fund managers to have the recognition of that risk and the capability to address those situations when they occur,” he said.
“There continues to be strong demand. Investors and credit providers have to navigate that world of opportunity and take into account the risks that are apparent.”
