Small Enterprise Assistance Funds – Company Profile

Mezzanine financing company overview

Mezzanine firm logo:

Small Enterprise Assistance Funds - mezzanine financing company logo

Headquarters location:

United States

Typical mezzanine financing range:

$200,000 to $3,000,000

Geographic focus:

Central & Eastern Europe, Latin America, Asia, Africa

Industry focus:

Industry agnostic

Company profile

SEAF is an investment management group that provides growth capital and business assistance to small and medium enterprises (SMEs) in emerging and transition markets underserved by traditional sources of capital. Through their network of offices around the world, they invest in entrepreneurs to seek to build successful businesses, hoping to realize both attractive returns for their investors and a measurable development impact in local communities.

SEAF partners with entrepreneurs in emerging and transition markets to grow their companies through customized financial solutions and expert business assistance. This strategy enables SEAF to navigate diverse geographies and environments, supporting the expansion of their companies across a range of industries.

SEAF provides their portfolio companies with various types of growth capital, including equity, mezzanine debt and term credit, to meet the unique economic and cultural needs of each of their markets.

Through their entrepreneurship program, CEED, and their network of international experts, SEAF actively partners with the portfolio companies to improve their operational capacity and maximize growth potential.

SEAF history overview

SEAF began in 1989 as the CARE Small Business Assistance Corporation (CARESBAC), a single member NGO owned by CARE, the international relief and development organization. At the time of CARESBAC’s launch, the international developmental community had begun to recognize the growing importance of the private sector in achieving economic growth, both in developing countries and in the transition countries following the fall of the Berlin Wall. Governments, international development institutions, and commercial investors alike turned to growing SMEs to seek to achieve prosperity and political and economic stability. In the case of many transition countries, large corporations were state-owned and required privatization, resulting in large-scale unemployment. A healthy SME sector was considered vital to both provide for the needs of consumers, as well as to generate a robust boost in employment. In 1992, SEAF launched their first fund in Poland, CARESBAC-Polska. They have since expanded throughout Central and Eastern Europe and into Africa, Asia and Latin America.

In 1995, CARESBAC spun out of CARE to become the Small Enterprise Assistance Funds (SEAF). Incorporated as a New York not-for-profit with a specific mission to engage in investment activity in emerging markets and manage for-profit investment vehicles that target businesses operating in underserved communities, SEAF grew rapidly following their inception. In 2005, they expanded the SEAF family by creating the Center for Entrepreneurship and Executive Development (CEED). CEED centers provide essential business development training and peer-to-peer learning to entrepreneurs in emerging markets to help them grow their businesses profitably and sustainably.

As of December 31, 2014, SEAF has made approximately 400 risk capital investments through 35 investment vehicles. SEAF’s experience and growth have prompted them to augment their country-based investment model, and in 2009 and 2010, they launched two global SME investment facilities. These facilities enable SEAF to continue relationships with portfolio companies and maintain their expert local leadership beyond the investment term of their individual country and regional investment vehicles. In doing so, they and their partners are laying the groundwork for an innovative financing structures to leverage the global network they have built over the years and providing growth capital on a more efficient basis for both SMEs and their partners.

SEAF team

SEAF is a global leader in small and medium enterprise (SME) investing in emerging markets and they attribute their success to their management model, which blends strong field-based investment teams staffed by resident nationals with an integrated and experienced central management and support team in Washington, D.C.

SEAF operations

SEAF has established its position through over twenty years of consistent operational growth. They have frequently been the first investment manager to enter an emerging market, and they pride themselves in their ability to train and support excellent and committed field staff. The key figures summarizing the operational breadth are:

  • 398 Investments
  • 238 Realizations
  • 35 Investment vehicles
  • 25 Countries of Investment
  • 694 Million USD Committed Capital (Includes India Growth Fund, which is sub-advised by SEAF)
  • 387 Million USD Invested Capital

SEAF is constantly expanding: creating new investment vehicles, broadening their footprint around the world, increasing their capital under management, making new investments, realizing exits from older investments, and returning capital to investors from these realizations. Over the past five years (2010-2014), they have made over 110 investments, and realized 75 investments.

They have invested and sequentially achieved successful realizations in a broad range of sectors across several regions. Historically, SEAF had an initial focus on Central and Eastern Europe. More recently, the majority of their investment vehicles have been established to target opportunities in Africa, Asia and Latin America.

SEAF economic impact

SEAF is dedicated to tracking the significant developmental impacts that result from their partnerships with small and medium enterprises (SMEs) in emerging markets. Through their investment experience, they have learned that fostering profitable, competitive local enterprises is a fundamental step in achieving sustainable economic development. Their partnerships with these promising SMEs generate measureable results across a variety of local stakeholders, increasing employment and wages for workers, creating new business opportunities for local suppliers, and improving the quality and availability of products and services for the local community, to name a few impacts. Through case studies and data collection, they calculate unique metrics on their impact investments across their emerging markets portfolio. Some of these statistics are:

  • Every $1 they invest generates $13 in benefits to the local society
  • 25% average annual increase in employment
  • 81% companies provide formal training to their employees
  • 77% jobs maintained & created go to unskilled & semi-skilled workers
  • 34% averaged annual increase in number of local suppliers
  • 19% average annual increase in wages
  • 49% average annual growth in taxes paid to the local government

Investment philosophy/criteria

Small and medium enterprises (SMEs) generally occupy the space between micro-enterprises and large corporations. An often ill-defined space, definitions of what constitutes an SME vary greatly across industries, governments and financial institutions. The most commonly accepted definitions focus on the number of people a company employs or the company’s annual revenue (turnover). Using these conventional categories, the companies that SEAF invests in generally employ between 20 and 250 people and have annual revenues of between $200,000 and $15 million; however, these ranges differ greatly for different investment vehicles, industry sectors and countries.

SEAF believes that SMEs are vital to the health and stability of any nation. They traditionally constitute the largest portion of the employment base, hire the greatest number of new employees, and provide the majority of a country’s goods and services. Many developing countries lack a vibrant small business sector, and, as a consequence, a growing middle-income population. And yet despite their importance, SMEs in emerging markets frequently suffer from insufficient access to financing, preventing these businesses from expanding their production and making a larger social and economic impact.

Entrepreneurs seeking financing in these markets are up against the perception of local commercial banks that SMEs are too ‘risky’ for traditional loans, and yet they are also too large for the growing number of microfinance programs. This gap in financing leads to what increasingly has been referred to as the missing middle. In SEAF’s experience, the lack of risk capital to the missing middle substantially diminishes the growth potential of these small and medium enterprises and, consequentially, has a profound negative impact on employment, the development of a middle class, and tax revenues that are essential to a country’s development of their social sectors. A vibrant middle economy is a key element in job creation, on the job training, poverty reduction, wealth creation, sustainable economic growth, and stability.

The SME opportunity

SEAF’s experience is that direct investment in SMEs supports sustainable economic development. They have seen first-hand that facilitating the growth of these companies by providing access to risk capital and business assistance can empower a company to overcome the impediments to its growth and lead to its production of higher value-added products or services for both domestic and international consumers, while accelerating the development of its surrounding community. SME investment leverages promising businesses to catalyze socioeconomic growth and entrepreneurship in local communities and markets. When done correctly and sustainably, such investment also produces significant returns for SEAF’s investors.

They invest in growth-oriented small and medium enterprises (SMEs) in emerging markets. Through their investments, they realize competitive returns for the investors while achieving a measurable socioeconomic impact in the communities in which they operate. SEAF’s investments across a diverse array of industries demonstrate the financial and development returns that are achievable through SME investment.

Across their international network of offices, SEAF’s investment team seeks to provide promising small and medium enterprises (SMEs) with customized financial products adapted to the unique economic, cultural, and regulatory requirements of each of their markets. SEAF’s investments take the form of equity, mezzanine, and term credit.

Mezzanine financing overview

SEAF’s mezzanine investments are generally subordinated loans that combine current interest payments with a participation in revenue, earnings growth or enterprise value. Typical mezzanine loan parameters are:

  • Structure: 5+ year term with flexible amortization
  • Investment amount: generally $200,000 to $3,000,000
  • Equity-type participation: revenue participation, variable or payment in-kind interest, conversion options, warrants

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