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Peer2Peer Finance News | November 14, 2018

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ThinCats announces Employee Ownership Association membership

ThinCats announces Employee Ownership Association membership
Kathryn Gaw

THINCATS has become a supporting member of the Employee Ownership Association (EOA) and has described employee-owned businesses as “an exciting growth area”.

The peer-to-peer business lender has released a white paper to mark its supporting membership of the EOA, in which the company details the benefits of employee ownership and the opportunities for alternative lenders in the space.

According to the ThinCats white paper, 200,000 employees shared ownership in 300 businesses last year, and almost 60 per cent of growth in the sector has taken place between 2010 and 2017.

However, ThinCats noted that while it is possible for employees to finance their buy-out with their own cash, the shares are usually bought on their behalf through an employee ownership trust (EOT).

The EOT funds are usually raised via senior debt, and financed by banks or alternative lenders such as ThinCats.

Read more: ThinCats launches ‘generator’ product to speed up lending

“EOTs are an exciting growth area,” said a ThinCats spokesperson. “The structure delivers equivalent and potentially greater returns to vendor than third party transactions, and with lower risk. In addition, the business tends to perform well when compared to other structures, post transaction.

“However, because of the highly specific nature of the transaction, participants need to draw on the expertise on both the corporate adviser and lender side to ensure that the deal is optimally structured, funded and executed. You need people that understand both your business and the specifics of the EOT structure.”

Last year, ThinCats helped Midlothian-based IT firm Network ROI raise £1m to fund its own employee buyout.

“We began to look at an exit strategy and a business plan to support that,” said Network ROI’s founder Sean Elliot. “I considered the usual options such as a trade sale but came across the concept of employee ownership.

“We had a beauty parade and narrowed down potential funding sources to two – ThinCats and a conventional high street bank.

Read more: ThinCats launches IFISA and auto-invest product

“While the bank’s business development people were keen to construct a loan that was viable for us, when it was referred to the credit committee we were presented with more draconian covenants, such as a shorter repayment term and taking all our business to the bank.”

Elliot eventually opted to go with ThinCats, and now all 32 of his employees share a stake in Network ROI.

“We are immensely proud to share our expertise with EOA members and to champion employee ownership,” said a ThinCats spokesperson. “Like them, our approach to funding is personal and working with the EOA will help our continuing support of employee ownership trusts nationwide.”

Read more: ThinCats launches £50m funding programme for West Midlands