Venture financier Equalife Capital is seeking to raise Sh2.1 billion or $20 million in a fund intended to lend to firms facing business cycle pressures and the coronavirus crisis within the East African region.
The relief fund is open to investors to put in cash within the next two weeks.
The launch comes as companies face cash-flow challenges, both expected and already.
“EquaLife Capital are taking early and decisive action to call on the global investment community to commit to a $20 million Africa Venture Debt Relief Fund by April 15 for venture businesses starting with a preliminary focus on the East African region,” the company said.
“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, minimising impact and economic development opportunity lost to unforeseen business cycle pressures,” it said.
Demand for the debt financing has grown in recent weeks as the disease outbreak expanded globally and deaths continued to be reported.
Kenya has already reported its first death and had a total of 31 cases by last Thursday. The relief fund will provide short-term debt on concessional venture debt terms after due diligence following to quick disbursement to support the successful businesses.
“Loans will be structured using a template loan agreement with tenors of six to 24 months depending on the identified need(s) of the organisation, with sizing ranging between $200,000 (Sh20 million) to $200 million. Interest rates will be targeted between five and 10 per cent annually,” it said.
The venture capital company 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.
Other services such as management (including monitoring and compliance) will be offered if requested by companies.
In some cases, blended capital between short-term debt and grants can be considered if needed for the venture to survive, the firm added.