Analysis

Solving the equity dilemma and funding the intangible economy

4th November 2019
Anna Flockett

Alternative SME credit specialist Caple has supported d EnSilica, a leading bespoke chip design and supply firm, with a £3.7m fully unsecured loan.  This will enable EnSilica to continue its expansion into high-growth sectors including automotive, space and the Internet of Things (IoT). EnSilica funds the design and supply of silicon chips for customers and then takes a share of the revenues once the chip design is proven.  Given the time between design and sales, the business needed additional funding to take on more orders and grow.

This unsecured lending has helped EnSilica solve the equity dilemma.  Without this finance, the business would have had to consider giving up equity to fund growth. 

EnSilica found access to secured lending an issue because its business is based on intangible assets, such as intellectual property.  It therefore lacked the tangible assets to put up as security to banks.

Dominic Buch, managing partner and co-founder of Caple, said: “Many successful businesses today are growing by investing in intangible assets such as intellectual property and software.  However, while banks can lend against the tangible assets in a business, they have more difficulty if a business has no physical assets to use as collateral.

“This creates a barrier to growth and may force businesses to issue equity instead of raising debt.  EnSilica had this very issue and had previously considered giving up equity in the business.  But now, with our unsecured funding deal, EnSilica can implement its growth plans without having to resort to equity funding and while retaining control of the business.”

Mark Hodgkins, Chairman of EnSilica, said:“Caple has an innovative and flexible service that removes the need for some privately held UK SMEs to finance their growth by equity funding and giving up value in their business.  I would recommend Caple to like-minded growth companies, who are looking for an efficient and quick decision on funding for growth.” 

Caple is the UK’s first firm to offer access to unsecured lending based on the future cash flows of the SME.  It requires no collateral or personal guarantees as security.  Loans originated through Caple also work alongside existing bank lending, meaning firms can have access to more funding than they would get from their bank alone. 

Caple originates loans through a local partner network of accountancy and business advisory firms.  Colin Burns, director at Bristol-based corporate finance firm Shaw & Co advised EnSilica.

Headquartered in Berkshire, EnSilica is a leading bespoke chip and systems design, development and supply house.  The company has world-class expertise in supplying custom analog-mixed-signal and digital integrated circuits to the automotive, space, IoT, consumer, communications, and industrial markets.

Founded in 2001, EnSilica also has offices in Oxford, Cambridge, India and the USA.  The business has a successful track record with customers ranging from start-ups to blue-chip companies.  The company also offers a broad portfolio of core intellectual property covering cryptography, radar and communications systems.

Colin Burns, director, Shaw & Co, who advised EnSilica said: “We worked closely with the EnSilica management team to arrange this flexible and affordable funding package and which is highly-suited to the company’s medium-term goals.  Now that EnSilica is well capitalised for the next stage of its journey, I’m excited to watch it develop into a major player in its chosen markets.  We are grateful to the team at Caple for their diligent yet expedient approach throughout this transaction, which completed in 10 weeks from initial discussion.”

The loans Caple facilitates are part of BNP Paribas Asset Management’s SME Alternative Financing direct lending platform, which enables SMEs to access funding from institutional investors.  BNP Paribas Asset Management aims to provide €1bn per year in funding to SMEs across Europe.

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