Grouped Debt Issues: capital markets can also serve SMEs

When we think about bonds, we usually think about large companies

That is understandable because a large bond issue requires scale, investors, documentation, structuring and costs that rarely make sense for an SME seeking to finance one or two million euros.

Although Portuguese companies have legal access to capital markets, in practice the financing of many SMEs remains heavily concentrated in the banking system.

Grouped Debt Issues, internationally known as Basket Bonds, seek to change this reality.

The idea is simple: rather than one SME trying to access the market alone, several companies make individual issues that are structured and aggregated into a larger transaction.

Each company remains responsible for its own debt, but access to investors is organised collectively.

Scale solves part of the problem

Consider an SME seeking to issue EUR 1.5 million in bonds.

On its own, the cost of structuring, documenting and placing the transaction may make the exercise inefficient.

Now imagine that twenty, thirty or fifty companies are brought together within a common structure. This aggregation makes it possible to:

• create a transaction of a scale that is relevant to investors;
• standardise processes;
• share costs;
• build a diversified portfolio of issuers.

This aggregation is precisely what makes Basket Bonds interesting.

Portugal has taken an important step

In June 2026, Portugal announced its first grouped SME bond issue with a public guarantee from Banco Português de Fomento, for a total amount of EUR 100 million.

The issues are structured and aggregated by Flexdeal and placed through the collaborative financing platform operated by Raizecrowd. The model seeks to bring SMEs and investors together through the capital markets.

Under the solution currently announced, each company may access up to EUR 2 million in financing, while the BPF public guarantee may cover up to 80% of outstanding principal, depending on the transaction's framework.

This is an important development, not only because of the size of the programme, but also because of the precedent it creates.

What difference does a public guarantee make?

The principal concern for an investor purchasing an SME's bonds is credit risk.

A smaller company normally has less public information, lower liquidity in its securities and greater idiosyncratic risk than a large listed group.

The public guarantee reduces part of that exposure. If a significant proportion of the principal is guaranteed, the risk profile of the transaction changes for the investor.

This may make it easier to place the issue and help secure more competitive financial terms.

But it is important to understand what the guarantee does not do:

• it does not eliminate the company's risk;
• it does not replace credit analysis;
• it does not make every company an eligible issuer.

Why might a company prefer a bond to a bank loan?

There is no universal answer. Bank finance will remain the most appropriate solution for many companies.

But the bond market can introduce an additional source of capital, which means diversification.

A company that depends excessively on two or three banks is naturally constrained by those institutions' risk policies, internal limits and appetite for its sector.

Entering the capital markets creates a relationship with a different universe of finance providers.

Depending on the terms of the issue, it may also allow a repayment structure different from that of a traditional bank loan.

There is also a less immediate effect: a first issue may require the company to professionalise its reporting, projections, financial communication and management discipline.

That can prepare the organisation for larger financial transactions in the future.

A bond is not "money without a bank"

Alternative finance is sometimes perceived as simpler finance, but that is not necessarily the case.

An investor will still ask questions similar to those raised by a bank:

• What cash flow does the company generate?
• How much debt does it have, and what is its debt service coverage ratio?
• What collateral is available?
• How have sales and margins evolved?
• What is the purpose of the financing?
• What risks exist in the business?
• How will the bond be repaid?

The economic questions are very similar to those a bank would ask. The channel is different.

What can it be used for?

A debt issue may finance different objectives, depending on the specific terms of the transaction:

• investment;
• expansion;
• equipment purchases;
• international growth;
• working capital associated with growth;
• refinancing certain liabilities;
• other eligible business needs.

The important point is that the maturity and repayment profile must be aligned with what is being financed.

Financing a long-term investment with an excessively short bond merely postpones the liquidity problem.

Price should not be the only criterion

A company comparing a bond issue with a bank loan should consider the total cost and the terms of the structure:

• interest and fees;
• structuring costs;
• guarantees;
• maturity and grace period;
• repayment profile;
• covenants;
• flexibility to incur new debt;
• information requirements.

In certain situations, an alternative carrying a slightly higher interest rate may offer greater financial flexibility.

In others, a traditional bank loan will clearly remain more efficient. The decision should be financial, not ideological.

The real gain is having more alternatives

The importance of Grouped Debt Issues goes beyond the first EUR 100 million.

Portugal's business landscape is dominated by SMEs and its financing structure has historically been heavily reliant on banks.

If instruments of this kind gain scale, companies will be able to combine bank finance, capital markets, public guarantees, debt funds and equity more effectively.

That diversification is positive because a company with several sources of finance can adapt its capital structure more effectively to different stages of its life cycle.

At Fenix Capital Partners, this is precisely the analysis we perform. We do not begin with the product, but with the company's financing need, debt capacity, cash flow and objectives. Only then do we compare structures and sources of capital: bank credit may be the answer, a bond issue may also be the answer and, increasingly, the best solution may combine both.

Grouped Debt Issues do not mean that capital markets have replaced banks.

They mean something that may be more important for Portuguese SMEs.

Capital markets have finally begun to become a genuine alternative.