Funding boost for Aircraft Medical

A MEDICAL device maker with a raft of distribution deals across America, China and the Far East has become the latest Scottish firm to secure a little-known form of funding to fuel its international expansion.

Fife-based Aircraft Medical, which makes equipment to help doctors put breathing tubes down patients’ throats, has sealed a $3.3 million (£2.1m) “venture debt” deal from Clydesdale Bank.

It follows on from a similar loan package worth £2.5m for Livingston-based artificial hand maker Touch Bionics in December 2010.

“Venture debt” was a popular method of supporting venture capital deals before the financial crisis.

Instead of traditional bank loans – where lenders need security in the form of property, machinery or other assets – venture debt involves specialist lenders providing money to companies at earlier stages in development, when they may not yet have assets.

The banks often take rights over the ownership of a company’s inventions or other intellectual property.

Lending cash to Aircraft Medical is the latest deal completed by Clydesdale Bank’s growth finance team, which was launched in April.

It follows £2.5m being lent to London-based drug marketing firm Specialist European Pharma in December and an undisclosed sum to Cambridge-based semiconductor outfit CamSemi in July.

Three pilot deals – with Touch Bionics, Aberdeen-based oil well engineering firm Red Spider Technologies and Livingston-based gas detection firm Cascade Technologies – were completed in the months leading up to the team being officially launched.

Graeme Sands, head of growth finance at Clydesdale Bank, said: “Although I developed my team based on the idea of venture debt, we typically invest in later-stage companies than other venture debt providers.

“The firms we’re investing in already have sales and are looking for lending so that they can step their growth up to the next level.”

Venture debt may sound like a more-risky type of lending, but Sands maintains that the way he carries out assessments of companies means that his group cuts down the risk to a similar level to more-traditional clearing bank loans.

Sands’ team includes Mark Taylor, who created Europe’s first venture debt business for Dresdner Kleinwort Benson in 1998, and Sandra Hope, who set up Noble Venture Finance in London alongside Taylor.

Dalgety Bay-based Aircraft Medical was launched in 2001 by chief executive Matt McGrath. He designed a laryngoscope with a built-in video camera to help medics see what they were doing when they place tubes down patients’ throats.

McGrath said the loan from Clydesdale would provide working capital for the roll-out of its latest products.

While Clydesdale is focusing on later-stage venture debt funding, William McIntosh – a partner at law firm Brodies – said he was seeing a return in the popularity of all venture debt, an area he covered while working with a corporate finance practice in France.

“My former colleagues in Paris are seeing a distinct revival in venture debt and I recently worked on a Franco-German deal in that area,” explained McIntosh.

He said the debt was primarily aimed at technology companies and was often used to make venture capital investments go a bit further before an investor exit, such as an initial public offering (IPO).

Other banks in Britain are also starting to make use of venture debt lending. In December, Santander unveiled plans for a £200m “fast growth” investment fund.