SMEs and the debt capital markets

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • SMEs and the debt capital markets
  • Introduction
  • Traditional debt capital markets
  • Funding for SMEs
  • Developments since the global credit crisis
  • What are SMEs?
  • SME growth markets
  • MiFID II
  • Market Abuse Regulation
  • Prospectus Regulation
  • More...

SMEs and the debt capital markets

Introduction

Traditional debt capital markets

The debt capital markets have traditionally been used by major companies to raise finance from an investor base consisting mainly of investment funds, pension funds, insurance companies and other so-called institutional investors.

As a result, debt capital markets transactions have been characterised by:

  1. large issue amounts—as a rule of thumb, at least £50m (or the equivalent in another currency) and usually more than £100m

  2. standardised distribution and underwriting procedures, in which a lead manager and co-managers, or dealers in the case of issues under a Euro Medium-Term Note (EMTN) programme, intermediate between the issuer and potential investors (for more information, see Practice Note: Parties in an issue of debt securities)

  3. standardised terms and conditions (for more information, see Practice Note: Terms and conditions of debt securities), and

  4. (because institutional investors typically wish to be able to manage their portfolios of debt securities actively, buying and selling as market conditions change) an emphasis on creating liquidity—the conditions in which debt securities can be bought and sold quickly and easily by investors at stable prices

Funding for SMEs

Small- and medium-sized enterprises (SMEs) have traditionally been unable to raise funds in the debt capital markets because:

  1. the amount of finance that they require is below the threshold amount for a viable debt capital markets transaction, and

  2. the expenses of a traditional

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