Medical device company funding in the UK
Medical device businesses sit in an awkward place for traditional lenders. They are often profitable and growing, they sell to some of the most reliable customers in the country, and yet their balance sheets are full of things banks find hard to value: invoices to NHS bodies with complex purchase order processes, stock spread across dozens of hospitals, and products whose value depends on a regulatory approval.
The good news is that a specialist lender sees those same features differently. An NHS trust or NHS Supply Chain invoice is a strong asset. A framework agreement gives real visibility of future revenue. A well-controlled consignment stock programme is a sign of a business that hospitals trust. The skill is in presenting the business so the lender sees the strengths first.
Invoice finance and ABL for device manufacturers and distributors
For most established device businesses, the debtor book is the largest and most liquid asset. Invoice finance releases up to 90% of eligible invoices as soon as they are raised, with funds within 24 hours of invoicing, so cash keeps pace with sales rather than with payment runs. Lenders will usually accept NHS Supply Chain, NHS trusts, private hospital groups and established distributors, and many will include export debtors where the business holds credit insurance.
From £2m, an asset based lending facility does more. It is one revolving credit facility with a single borrowing base across up to four asset classes: trade receivables at up to 90% of eligible debtors, stock at up to 90% of net orderly liquidation value, plant and machinery at up to 85% of NOLV and owned property at up to 80% of market value, with plant and property as term loans inside the facility. Facilities run from £2m to £120m on 3 to 5 year committed terms, priced from 2% over Bank Rate on the receivables line, and the limit grows automatically as the business does.
Funding consignment stock at hospitals
Consignment stock is common for implants, surgical instruments and high-value consumables. It remains yours until the hospital uses it, which means cash tied up in stock you cannot physically see. Some lenders exclude it entirely. Others will advance against it if you can report usage and stock levels by site, ideally from a system that reconciles to hospital records. Getting that reporting right before a lender audit can make a meaningful difference to the size of the facility.
How lenders view pre-approval revenue
Revenue forecasts that depend on a product gaining UKCA or CE marking, MHRA registration or approval in an export market are treated cautiously. Most working capital lenders will only lend against approved, invoiced sales. That does not mean the pipeline has no value. A clear regulatory timeline, notified or approved body correspondence and evidence of customer demand help growth lenders and investors, and they strengthen the overall credit story.
We separate approved and pipeline revenue in the credit paper. Lenders respond far better to an honest split than to a forecast that blends the two and invites the question.
Funding NHS tenders and framework agreements
Winning a framework place or a large hospital contract is often the moment a device business runs short of cash. Materials have to be bought, contract manufacturers want deposits and stock has to be built before the first call-off order is invoiced. Supply chain and purchase order finance, a separate facility alongside the working capital line, funds up to 100% of supplier cost against confirmed orders on terms of up to 180 days, and is repaid when the customer pays. Combined with an invoice or ABL facility that picks up the new invoices, it lets the business deliver a major contract without raising equity or turning work away.
It is worth talking to us before you submit a large tender. Showing a procurement team that the funding to deliver is already in place can strengthen your bid.
R&D tax credit advances and growth debt for medtech scale-ups
R&D-intensive device and diagnostics companies often wait many months after their year end for a tax credit to arrive. An R&D tax credit advance borrows against the expected claim, typically up to 80% of it, so the cash funds development when it is needed. Lenders will want to see your claims history and how the claim is prepared.
For venture-backed medtech and digital health businesses, growth or venture debt can extend runway between equity rounds and reduce dilution. It is sized on the strength of investors, revenue and cash runway rather than on profit, and usually sits alongside a recent or planned equity raise.
Export and trade finance for life sciences
Many UK device businesses buy components from Europe, the US or Asia and sell through distributors in dozens of countries. Trade finance, a separate facility from any ABL line, pays up to 100% of supplier cost when goods ship on terms of up to 180 days, export finance supports overseas sales through letters of credit and credit insurance, and government-backed export guarantees can give lenders comfort to support larger contracts. Each piece shortens the cash cycle and reduces reliance on a single overdraft.
Currency matters too. Where components are bought in dollars and products sold in sterling or euros, a facility that can be drawn in more than one currency, alongside simple hedging, protects margins on long contracts.
Funding acquisitions and buy-outs in medtech
The device and diagnostics market is consolidating, with manufacturers buying distributors to get closer to hospitals and distributors buying product lines to protect their margins. Acquisition finance for these deals is lent on the combined group's earnings, at up to 5x EBITDA, with the target's receivables and stock brought into an enlarged ABL facility. Management buyouts are common too, particularly where a founder is retiring and the team knows the products, customers and regulatory files inside out.
Lenders will look closely at whether key product registrations, distribution agreements and NHS framework positions transfer cleanly on a change of ownership. As debt adviser we run the process end to end, from the information memorandum and lender process to term sheets and completion, and build those checks into the timetable from the start so they do not hold up completion.
What makes a medical device deal fundable
None of this needs to be perfect before the first call. We help you get the information into shape, then write a credit paper that explains your products, customers and cash cycle in the way a lender needs to see them.
- Monthly management accounts that tie back to the filed accounts
- A clean aged debtor report with purchase order references
- Stock reporting by location, including every consignment site
- A product list showing regulatory status and approval timelines
- Contract and framework summaries with renewal dates