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Small business loan trust targets 6.5% yield

RM Secured Direct Lending plans to raise £100 million and target lending to small and medium-sized businesses.

 
Small business loan trust targets 6.5% yield

RM Secured Direct Lending (RMDL), an investment trust specialising in small and medium-sized business lending, is to float on the main market.

The trust plans to raise £100 million through a London Stock Exchange listing in order to expand its lending to small and medium-sized businesses, which it said have been locked out of borrowing since the financial crisis.

It focuses on loans with ‘a degree of inflation protection through index-linked returns’ and will aim to generate regular dividends, with a targeted yield of 6.5% once fully invested.

To be eligible for RM loans businesses much be able to demonstrate ‘visibility over cashflow and earnings and strong management teams’ and the loans will range from £2 million to £10 million with maturities ranging from two to 10 years. The loans will be secured against ‘contracted, predictable medium to long-term cashflows’ or physical assets held by businesses.

To ensure diversity of loans there will be maximum exposure limits in sectors and the trust said it had a seed portfolio and a pipeline of loans worth £136 million lined up.

James Robson, chief investment officer at RM Capital, which is the investment manager of the trust, said: ‘Secured lending offers excellent risk adjusted returns in a part of the market underserved by banks and other non-bank lenders.

‘RM has the capability to originate and source loans across a broad range of sectors with robust security packages which offer stable and predictable returns while also enabling the growth and development of well-established SMEs who are the backbone of the UK economy.’

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