Financing from alternative sources more than tripled to 56 deals in the last quarter of 2013 compared with the first period of the year, according to the report. The majority of the new debt funded buyout transactions, Deloitte said.

While big businesses have never been better-placed to raise financing in capital markets, commercial banks seeking to conserve capital have reduced lending and created a void that new actors are now stepping in to fill. The bankers’ retreat has opened the door to buyout firms, venture-capital funds, insurers and pension providers.

“Some alternative lenders will now look to lend to businesses with less than 10 million euros of Ebitda,” said Nedim Music, manager of U.K. debt advisory at Deloitte in London. “Alternative lenders are becoming more established and providing debt for a broader range of transactions.”

Barclays Plc, the U.K.’s second-largest bank by assets, joined BlueBay Asset Management LLP to provide direct lending to U.K. companies in January. The fund will make so-called unitranche loans, which combine senior and junior debt into a credit facility and have a single repayment at maturity.

“Fund partnerships with banks can be a win-win for all,” Music said. “The funds don’t have large origination desks, so working with banks helps them get new business.

To contact the reporter on this story: Julie Miecamp in London at jmiecamp@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

http://www.bloomberg.com/news/2014-02-24/small-companies-seen-beating-european-bank-cut-backs-for-funding.html

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