Impact investment is all about delivering a targeted rate of return to investors while aligning with their values. For some it means ‘do no harm’, for others it means ‘do some good’.
Advance Global Capital (AGC) is committed to greater financial inclusion. We have chosen to focus on small and medium-sized enterprises (SMEs), which often struggle to manage their cash flow due to timing differences between when these suppliers deliver their products and when the buyers eventually pay. Cash is the lifeblood of any business. The sooner the payment, the sooner that money can be invested back into the business.
In much of the world, appropriately structured short-term financing from local banks is not available. AGC addresses that gap by providing supply chain finance to suppliers selling to a single corporate buyer. Earlier payment enables these SMEs to grow and create more stable jobs – along with the benefits this brings to the broader community.
Our impact goals are focused:
1. More short-term financing for SMEs, particularly women-owned businesses
2. More jobs
3. Stronger local financial ‘eco-systems’ – particularly in emerging markets
Reliable, fairly priced working capital financing helps small businesses find the confidence to hire staff and invest for growth. By doing so, SMEs will create tens of thousands of jobs, with benefits that impact the lives of many more.* Working with local financial partners, we provide access to funding and expertise to diversify the financial services they can offer and strengthen relationships between suppliers and buyers in emerging markets.
With the support of our local partners, the SMEs we provide financing to and their customers, AGC aims to track the performance of those SMEs using metrics developed by the Global Impact Investment Network. This will be part of our ongoing due diligence process. Measuring impact is not easy, but it is essential.
AGC is introducing many in the investment community to an ‘asset class’ which has been around since the Roman Empire, with its extensive trade routes across the world. The term ‘factor’ comes from the ancient word meaning ‘agent’ – the one who advanced cash to sellers while they waited to be repaid. Whether it’s called ‘factoring’ or ‘trade receivables finance’ or ‘discounting of invoices’, this tool remains as needed today as it was centuries ago. Together with our partners, affiliates and investors we are working to be agents for change.
* Based on a survey of similar investments conducted by the ODI, for every $1m we invest we expect to create 106 jobs.