ARQCAPITAL Partners, Inc. announced on Wednesday that it is planning to raise and deploy P1.5 billion in capital to around 20 to 50 small and mid-sized enterprises (SMEs).

“That’s the vision of ARQ. We are an SME focused investor. Our heart and vision is to serve this segment,” ARQCapital Founding Partner Edmund Solilapsi said in a virtual briefing.

ARQ SME Mezzanine Business Development Co. (ARQ SME BDC) was formed by ARQCapital in 2014, with the goal of being an SME-focused private mezzanine debt investor.

“We customize multi-product investment structures to fully service the critical growth stage of a promising medium enterprise,” Mr. Solilapsi said.

The firm focuses on “smart capital” investments in the private and alternative lending space.

“There are a few ‘smart capital’ investors in the Philippines today and this space has yet to be institutionalized,” he added.

Mr. Solilapsi said that the country’s financing market is dominated by banks and nonbank financial institutions, which are primarily passive capital providers and predominantly asset-backed.

“The private lending space is highly fragmented and is generally yield-driven with no clear thematic approach necessary in providing smart capital and creating an enabling environment for these enterprises,” he said.

“Venture capital firms focus on early-stage startups and tech-driven companies while private equity investors and strategic investors focus on larger investments and more mature enterprises,” he added. “This environment leaves SMEs with more traditional but similarly growing businesses uniquely challenged to find the right capital partner to fuel their growth.”

ARQCapital has invested approximately P1 billion in 33 firms since 2016 through its ARQ SME BDC and through co-investment partners.

For 2022, the company said it plans to fund 10 more mid-sized enterprises by yearend to add to its current portfolio of 22. It is also raising additional capital from development institutions to fund its investments. — Luisa Maria Jacinta C. Jocson