Sub line start-up builds bridge from Europe to US

London-based start-up Bridge, an online platform for matching sub line lenders and borrowers, has accelerated its plans to expand into the US. The company began operating in the UK and Europe last autumn.

Founder Andrew Frazer Smith tells Private Funds CFO that he originally intended to bring the platform stateside later this year, but strong interest from market participants in the US changed his mind.

Bridge is in the process of onboarding 22 lenders for the UK and Europe, Smith says. Once lenders are onboarded, the start-up will open to GPs – Smith’s goal is to hit this milestone by the second quarter of this year.

Bridge’s aim is to streamline the process of matching lenders and borrowers of subscription lines in negotiating their terms, in a kind of high-finance equivalent of websites matching retail customers with credit card offers.

“What we need is to tech-enable some of the existing processes to make people’s lives easier. And there’s been a huge number of examples of that in retail markets,” Smith says. “There’s less examples in financial markets, but there’s still plenty of them.”

He also believes that supply-side shocks in the US – such as last year’s bank failures and the impact of capital requirements – have driven stateside demand, as borrowers look to broaden their network of relationships with business continuity in mind.

Bridge is one of two recently launched online sub line marketplaces. London Stock Exchange-listed Alpha launched its own online fund finance marketplace last year, as well.

How it works

Lenders and sponsors that use the marketplace will be able to upload information about their sub line criteria, with the details available to share so that each side can find a match.

“We enable GPs and lenders to connect with each other based on their own direct appetites or borrowing requests, which they themselves input into Bridge,” Smith says.

Counterparties will then be put into a virtual setting where they can freely hammer out remaining details.

“We are not, for example, an adviser where we’re collating information and keeping that up to date ourselves, and then trying to match people based on that, where there’s a time lag,” Smith notes. “We’ve got real time information where lenders input their appetite. Similarly, GPs input what they’re looking for, and they are matched within seconds.”

Smith adds that the platform can also help streamline the process of coordinating club deals. Borrowers are able to access a “single-view environment” with all available lenders and can engage with a select group of them for larger loans.

“They can put out the lead terms that they want their selected club of lenders to work towards,” Smith explains. “And at that point, lenders could also see the other lenders in that club, and they can see where those other lenders are at any one point in time based on progress milestones that the borrower has set.”

GPs will also find something familiar that comes up in fund finance banking: the opportunity to obtain additional services from lenders. Smith cited private banking and FX as examples of what can be offered.

Smith previously worked at NatWest Group until he left last year to work on his start-up full time ahead of its launch. He says he served in various roles at NatWest, including seven years in fund finance before he switched to another business line in 2018. It was around this time that he first had the idea for something like Bridge, which he then spent subsequent years fleshing out before landing investment capital in early 2023.

Further out

Smith has no shortage of ideas for new features once Bridge is operational.

One is to offer direct support for “back-book distribution” to lenders, which is when one lender distributes portions of a sub line via syndication. Bridge is starting with front-end support for bilateral and club deals, but Smith explains that lenders can also make distributions behind the scenes.

Another feature would create “shadow” credit ratings for GPs to use for their sub lines. Smith explains that Bridge would use a rating agency’s methodology and come up with a rating equivalent to give sponsors an idea of an actual rating they may be able to attain.

And he did not rule out adding NAV loans as a lending option further out in the future, expecting it to “be kind of a 2025, 2026 conversation.” NAV loans present much greater challenges, are considered generally riskier than sub lines and are much more bespoke.

Smith is also interested in adding support for sub lines that are linked to ESG criteria, although, again, such deals are often idiosyncratic in how ESG KPIs are measured and borrower benefits obtained.