Many of the world’s frontier markets do not have robust banking sectors and thus suffer from a lack of access not only to equity financing, but also to debt — especially longer-term debt financing. In such cases, Schulze Global fills this gap with its debt platform. The firm applies the same rigorous standards and criteria as it does with its private equity platform but structures its investments in the form of loans rather than equity.
Schulze Global will consider debt investments in proven management teams with existing cash flow. It seeks to invest in businesses where it understands the financing and cash-flow needs, and the broader revenue potential, of the particular company seeking debt financing as well as of the sector in which the company operates.
Schulze Global’s debt platform makes use of the firm’s local presence, experience with conducting due diligence, and hands-on approach to portfolio management to sustainably issue debt in frontier markets.
Schulze Global’s preferred lending structure is a senior secured loan with conservatively structured collateral and ratio covenants. However, in select cases Schulze Global may consider convertible debt instruments, bridge loans, and mezzanine financing. All Schulze Global loan recipients are subject to rigorous due diligence and must meet strict screening standards. For its debt products, the firm focuses on the same sectors as its private equity platform.
Schulze Global runs the Schulze Global Mongolia Debt Facility (SMDF), a partnership between Schulze Global and the U.S. government’s Overseas Private Investment Corporation (OPIC) for the purpose of making loans to small- and medium-sized enterprises in Mongolia. SMDF has made loans across a variety of sectors, including financial services, manufacturing, construction, and building materials.