In a recent MarktoMarket webinar, Danyal Khan, founder of Altocrest Advisory, shared his expertise on debt financing for SMEs, offering valuable insights for businesses seeking growth capital. Danyal Khan launched Altocrest Advisory in September 2024 after six years as a director at EY’s debt advisory team and prior experience in credit approvals at HSBC and Royal Bank of Canada.

The Lower Mid-Market Landscape

The webinar explored the debt advisory landscape for businesses in the £1-9 million EBITDA range. Larger advisory firms typically don’t serve this segment due to fee economics and overhead costs, creating a gap in the market for specialised debt advisory services. Altocrest Advisory was established to focus on this underserved area of the market.

Boutique advisors in this space typically structure fees with a small upfront retainer and success fee, though approaches vary. Engagements are often assessed case-by-case rather than purely as a percentage of deal size, with transactions in the £5-10 million range often involving comparable levels of work.

Specialist Debt Advisory vs. Generalist Corporate Finance

The discussion explored how specialist debt advisors differ from generalist corporate finance advisors. While M&A advisors may handle debt alongside equity transactions, specialists typically focus exclusively on debt financing and develop deeper lender relationships. The webinar noted that businesses often engage debt advisors later than would be optimal, potentially missing opportunities to structure financing more effectively from the outset.

Several critical considerations for businesses seeking debt financing were covered:

Lender Selection: Lender selection varies depending on the specific situation. High-street banks continue to remain very active, while alternative lenders, both banks and debt funds, can provide more bespoke solutions and are typically at a higher cost of capital.

Covenant Structures: Many businesses underestimate the complexity of financial covenants. The discussion highlighted that poorly structured covenants can create unnecessary technical breaches despite strong underlying performance. Getting covenant structures right from the start prevents future complications and maintains positive lender relationships.

Strategic Preparation: The webinar advised businesses to prepare thoroughly before approaching lenders, including developing credible financial forecasts, understanding their capital needs, and articulating clear growth strategies. The quality of preparation directly impacts the likelihood of approval, as well as the deal terms.

Market Outlook

Market uncertainty was a challenge for businesses seeking debt financing in 2025. The discussion suggested that companies with thin profit margins may face more scrutiny as lenders factor in sensitivity to unexpected economic shocks. Demonstrating resilience and the ability to absorb volatility will be important for borrowers.

On market dynamics, the webinar anticipated continued growth in debt options for SMEs, with new funds and alternative lenders regularly entering the market. These new entrants typically source capital from institutional investors or expand from commercial lending into corporate lending. The increased competition among lenders generally provides borrowers with more options and potentially better terms.

The webinar emphasized the importance of early strategic planning around debt structure and the value of understanding different lender types, covenant requirements, and preparation standards when pursuing debt financing.

Based on a webinar by Danyal Khan, founder of Altocrest Advisory

Written by Danyal Khan, founder of Altocrest Advisory, and MarktoMarket Commercial Manager, Kathryn Stevenson