The fund, which was launched in 2019, will provide capital to a diverse set of small and lower mid-market US companies, typically with $2 million-$15 million of EBITDA, less than $100 million of annual revenue and consistently strong profit margins, the manager said in a news release. It also features a dedicated vehicle focused on providing capital to businesses located in “otherwise underserved communities”, which will create jobs in communities with low-to-moderate income levels, the statement said. More than 30 percent of the fund has already been invested, the firm told Private Debt Investor.
The predecessor fund, Small Business Credit Opportunities Fund, was launched in 2015 and raised $125 million. Nearly 90 percent of institutional investors in that fund participated in the latest vehicle, including public and corporate pension plans, insurance companies, foundations and family offices, the statement said. The majority of investors are US based, with “significant” capital commitments from investors in Asia and Europe.
The credit platform complements Siguler Guff’s existing buyout equity investment strategies and provides the firm with “a unique ability to invest up and down the balance sheet of high-quality small businesses”, the statement said. Siguler Guff, with $15 billion of assets under management, said its small business buyout experience will drive “significant sourcing and underwriting advantages” for the fund, leveraging the firm’s presence in more than 100 small buyout funds, with experience in “hundreds of portfolio companies” and a broad network of sponsor relationships.
The firm has developed “a proven formula” for small business investing, Sean Greene, a managing director and head of the firm’s small business lending platform, said in the statement. The formula includes “identifying time-tested, resilient companies that are leaders in an attractive market niche; in conservatively structured transactions; alongside high-quality sponsors”, he continued. Greene said the portfolio reflects the American economy with investments across the nation, in industries ranging from food to specialty manufacturing, business services, healthcare, and the like.
Greene called the resilience of small businesses across economic cycles, and most recently the covid pandemic, “truly remarkable”. Although the firm didn’t specify target returns, Greene said it looks forward to continuing to create “significant value” for both its investors and its small-business borrowers. The firm, he said, believes that its investors can realise “strong and sustained risk-adjusted returns”.
The firm told PDI that it is looking to have “place-based”, rather than sector specific, impact in its vehicle for underserved communities. It will focus on specific geographies that meet federal government definitions of underserved, specifically low-moderate income areas with historically underutilised business zones.