East Africa-focused venture builder, EquaLife Group, has announced a USD 20 Mn a Debt Relief Fund to assist businesses hit by the economic ramifications of the COVID-19 crisis.
EquaLife Capital, which claims to be Africa’s first venture-debt fund, is committing to what it calls a ‘Relief Fund’ by April 15th for venture businesses, starting with East Africa.
As stated in a post on EquaLife’s official website, “The Relief Fund is created and structured by Entrepreneurs for Entrepreneurs as we understand the need to act quickly to ensure businesses can survive, and then thrive again, minimizing impact and economic development opportunity lost to unforeseen business cycle pressures.”
These past few weeks, the need for a new type of venture-debt financing has been growing exponentially as ventures seek to cope with cash flow challenges – expected and realized – related to the crisis.
Thus, EquaLife claims to be taking on the challenge which is troubling virtually the entire market.
The Relief Fund will provide short-term debt on concessional venture debt to businesses hit by the COVID-19 pandemic. Loans will be structured using a template loan agreement with tenures of 6 to 24 months depending on the identified need(s) of the organization, with loan sizes ranging between USD 200 K to USD 2 Mn.
Interest rates will be targeted between 5 and 10% annually. According to the venture builder, EquaLife Capital and its partners will make additional resources available ‘pro-bono’ to the invested portfolio companies to ensure that they are able to navigate the financial difficulties they are facing.
“A more comprehensive suite of services (e.g. CFO-as-a-service, monitoring & compliance, etc.), if requested by companies, would be made available and could be paid in equity or warrants to avoid draining much need cash resources and also to align the long-term interests of the fund managers with the portfolio entities,” EquaLife claims.
Founded in 2012 by Managing Partner, Amanda Cotterman, who has been living in Kenya for the last 8 years, EquaLife Group claims to play two distinct roles in the East African region.
The Group started as a developer and operator of businesses and has now also evolved into EquaLife Capital, in addition to EquaLife Advisory Services.
EquaLife says end-to-end “inquiry to deployment” will be completed in less than a month. Also, in some cases, blended capital between short-term debt and grants can be considered if needed for the venture to survive.
The group is willing to put a lot of resources on the line to prove the impact of this intervention in the hopes of catalysing similar initiatives in other regions across the African continent in the coming months.