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New alternatives emerge in the wake of challenges faced by traditional financing from the banking sector
Por Marian Díaz
Puerto Rico Business Insights by El Nuevo Día
Limitations on traditional financing opportunities have propelled the emergence of funds that seek to invest in the growth of local companies, which would not be able to obtain loans from banks nowadays, as stated by executives from Grupo Guayacán Inc. (GGI).
“Within this difficult situation, there are local managers that have surfaced and that are entering the market with new products,” expressed Laura Cantero, Chief Executive Officer at GGI, who said that many of these managers are professionals with experience in banking and investments.
Guayacán has assumed a supporting role for this new generation of managers of private equity funds that invest in Puerto Rico. Cantero indicated that the entity has spent more than a year working closely with local managers and with the Office of Small Business Administration (SBA), to promote the Small Business Investment Company (SBIC) program on the island.
This program encourages the development of equity funds and private debt through a matching fund mechanism. For every dollar that a SBIC raises from private investors, the SBA provides $2 in equity through a guaranteed debt, subject to a $150 million limit.
In addition, Guayacán supports the emergence of funds in different ways and in other areas, including early equity fund investments, private debt funds, and equity funds for growing companies.
According to the director of the GGI, to complement these efforts, it will be necessary to develop, in parallel, local talent in the private equity sector and search for partnerships with experienced managers abroad. Currently, there are three equity investment funds on the island.
For Cantero and Gabriela Álvarez, Strategic Development Manager at GGI, one of the factors that have propelled the development of emerging funds on the island has been Act 185 on Private Equity Funds, approved on November 2014.
This act offers investors contributory benefits for investing in private equity funds that invest locally.
Another factor, according to the respondents, is the work carried out by investment advisory firms, like Consultiva, since they promote having a local investment component included in their portfolios. “This offers a sturdier ground to support emerging managers,” indicated Cantero.
On the other hand, 2010 brought forth the creation of the first Puerto Rico angel investor group, which has already invested in local companies. Others are also interested in organizing themselves as angel investors and GGI is enabling them so they can integrate themselves into the ecosystem in the near future.
“We hope this alignment of favorable conditions for investment helps us resume the program that Ricky (Adsuar) created when he devised Guayacán,” expressed the executive director of GGI.
“In five years time, there will be a stronger private equity market that introduces the investor to a variety of local investment tools in companies that are in different levels of development,” said Àlvarez.
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