The lender provides a line of credit, so for example, an adviser may have bought three businesses but has other acquisition targets. Rather than constantly going to secure a new loan, they can draw on the committed facility provided by ThinCats.
While management buyouts remain a popular exit route where ThinCats has funded many transactions, it is seeing increasing interest from owner-managers seeking to transfer ownership to their employees via an employee ownership trust.
One of its most recent transactions involved providing funding to Cheetham Jackson in March to help it transition to an employee ownership trust.
An employee ownership trust is a trust that enables a company to become owned by its employees and can be set up by a company's existing owners, perhaps as part of their exit or succession planning strategy, or by founders starting a new business that they wish to be employee-owned.
The lender also entered into a funding deal in March with MWA Financial, which enabled the owners to hold onto 100 per cent of their shares.
ThinCats’ total book of business is worth around £800mn, of which the IFA sector makes up 15 per cent.
Anand joined ThinCats in 2015 after ESF Capital (European Speciality Finance) purchased a 73.4 per cent equity stake in ThinCats. Previously, he was the managing director at ESF.
The lender originally launched as a peer-to-peer business lender in the UK in 2011 allowing individuals to lend money to limited companies. It closed its P2P lending platform in 2019 to focus instead on institutional lending.
A trained accountant, Anand’s background is in investment banking, having worked for New Star, under Jupiter founder John Duffield.
As an asset manager, New Star primarily distributed to IFAs selling long only retail funds.
“So I got to know the retail market, primarily through that: understanding the challenges, regulatory issues, the management of client funds and dealing with high-net-worth money.”
ThinCats is attracted to IFA business, Anand says, because they are robust businesses with strong client bases and recurring revenues.
“Their assets are the clients and clients don't [leave a business easily]. The assets are the client base, and of importance is the quality of the IFA as well. From a lending point of view, it makes a lot of sense,” Anand says.
“You need to understand the dynamics of the robustness of the industry to be able to lend… so you can get to that decision-making very quickly.”
Conversely, ThinCats is cautious about IFAs who are heavily commission-based. He is also not keen on businesses that a 'star' adviser type of individual that controls half of the client book in revenues: “That's a challenge, right? Because you've really got key man risk.”
