Birmingham-based Love Finance secured £45 million in debt financing—a £35 million revolving credit facility from Paragon Bank and £10 million junior medium-term note programme from LGB Capital Markets—marking the bootstrapped SME lender’s first institutional debt arrangement after eight years of profitable operations.
The debt facility enables Love Finance to originate loans directly from its own balance sheet rather than exclusively brokering third-party capital, a strategic shift that accelerates underwriting decisions and improves unit economics by capturing interest margin rather than referral fees.
Founded in 2016 by Jack Smith, Love Finance grew revenue over 900% in four years to £9.2 million in 2024 while remaining fully bootstrapped and profitable. The company has facilitated £300 million in funding to over 7,000 UK SMEs through its broker and direct lending operations.
Love Finance’s decision to raise debt rather than equity preserves founder ownership while providing growth capital—unusual for high-growth fintech companies that typically pursue venture capital rounds. The move suggests strong unit economics that support leveraged growth without equity dilution.
Jamie Pickering, Co-Head of Structured Lending at Paragon Bank, framed the facility as supporting “high-growth businesses with bespoke funding solutions that enable them to scale at pace.” Paragon’s Structured Lending division specializes in providing senior secured funding to non-bank lenders expanding loan portfolios.
The £35 million senior facility from Paragon combined with £10 million junior notes from LGB Capital Markets creates a layered capital structure typical of non-bank lending operations. Senior lenders provide the majority capital at lower rates, while junior capital absorbs first losses in exchange for higher returns.
Fergus Rendall, Director at LGB Capital Markets, cited Love Finance’s “data-driven approach to SME lending” as differentiating the company in a crowded market. The institutional backing validates the company’s underwriting models and default management capabilities.
Operating as a broker generates referral fees but limits revenue per transaction. Direct lending captures net interest margin—the spread between funding costs and loan rates charged to SMEs. This typically delivers higher revenue per loan but requires balance sheet capacity and credit risk management infrastructure.
Love Finance’s claim of providing loans “in as little as 4 hours” suggests automated underwriting processes that reduce manual review costs. Traditional banks require days or weeks for SME loan approvals due to legacy systems and compliance processes.
The company’s 5-star Trustpilot rating and branding emphasizing “simple, fast, and beautiful” business finance positions it as consumer fintech applied to B2B lending—prioritizing user experience over traditional relationship banking approaches.
UK SMEs represent 99.9% of private sector businesses and employ 61% of the workforce, creating substantial addressable market for alternative lenders. Traditional banks have reduced SME lending exposure since 2008 financial crisis, creating gap that fintech lenders target.
However, SME default rates spike during economic downturns, creating cyclical risk for balance sheet lenders. Love Finance’s ability to maintain profitability while scaling suggests either conservative underwriting, effective collections operations, or favorable economic conditions during the growth period.
The £45 million debt facility provides finite lending capacity. At typical loan-to-value ratios for secured lending facilities, Love Finance can potentially originate £40-50 million in new loans before requiring additional capital. This creates a near-term growth runway but signals future capital needs if the company sustains current growth trajectory.
UK alternative SME lenders include Iwoca, Funding Circle, and MarketFinance, with varying business models spanning invoice financing, merchant cash advances, and term loans. Love Finance’s combined broker and direct lending model attempts to capture customers across credit spectrum—brokering applicants outside its credit box while retaining strong credits on balance sheet.
This hybrid approach mirrors US companies like LendingTree, though Love Finance operates direct lending alongside brokerage whereas LendingTree remains pure marketplace. The strategic advantage: customers rejected for balance sheet loans can be monetized through broker referrals rather than lost entirely.
For fintech investors, Love Finance demonstrates an alternative path to venture capital—bootstrap to profitability, then lever the balance sheet with debt rather than raise dilutive equity. This works when unit economics support profitable growth and founders prioritize ownership over growth velocity.
The company’s performance will test whether bootstrapped fintech can compete against venture-backed competitors spending heavily on customer acquisition and technology development.
